December 13, 2017
November 01, 2017
December 13, 2017 FOMC Statement
FOMC statement
Federal Reserve issues FOMC statement
For release at 2:00 p.m. EDT EST
Information received since the Federal Open Market Committee met in September November indicates that the labor market has continued to strengthen and that economic activity has been rising at a solid rate despite rate. Averaging through hurricane-related disruptions. Although fluctuations, job gains have been solid, and the hurricanes caused a drop in payroll employment in September, the unemployment rate declined further. Household spending has been expanding at a moderate rate, and growth in business fixed investment has picked up in recent quarters. Gasoline prices rose in the aftermath of the hurricanes, boosting On a 12-month basis, both overall inflation in September; however, and inflation for items other than food and energy remained soft. On a 12-month basis, both inflation measures have declined this year and are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Hurricane-related disruptions and rebuilding will continue to affect have affected economic activity, employment, and inflation in the near term, recent months but past experience suggests that the storms are unlikely to have not materially alter altered the course of outlook for the national economy over the medium term. economy. Consequently, the Committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, pace and labor market conditions will strengthen somewhat further. remain strong. Inflation on a 12-month 12‑month basis is expected to remain somewhat below 2 percent in the near term but to stabilize around the Committee's 2 percent objective over the medium term. Near-term risks to the economic outlook appear roughly balanced, but the Committee is monitoring inflation developments closely.
In view of realized and expected labor market conditions and inflation, the Committee decided to maintain raise the target range for the federal funds rate at 1 to 1-1/4 to 1‑1/2 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in strong labor market conditions and a sustained return to 2 percent inflation.
In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.
Voting for the FOMC monetary policy action were: were Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Patrick Harker; Robert S. Kaplan; Neel Kashkari; Jerome H. Powell; and Randal K. Quarles. Voting against the action were Charles L. Evans and Neel Kashkari, who preferred at this meeting to maintain the existing target range for the federal funds rate.
Implementation Note issued November 1, December 13, 2017
The balance sheet normalization program initiated in October 2017 is proceeding.
Our summary
What changed
- Raised the target range for the federal funds rate to 1-1/4 to 1-1/2 percent, from 1 to 1-1/4 percent.
- Revised language on hurricanes: from expecting disruptions to affect the outlook to stating they have not materially altered it.
- Updated labor market description: from 'continued to strengthen' to 'averaging through hurricane-related fluctuations, job gains have been solid'.
- Noted that both overall and core inflation have declined this year, removing the specific mention of September gasoline price effects.
- Removed the paragraph on the balance sheet normalization program; the current statement does not mention it. Also recorded dissents from Evans and Kashkari.
Implications
The removal of the balance sheet paragraph signals that normalization is on track and no longer needs explicit reiteration.
The upgraded hurricane language suggests the FOMC sees the economy as more resilient, supporting the rate hike.
The dissents indicate internal disagreement, but the majority's action implies confidence in continued gradual tightening.
Summary generated automatically from the statements. Not investment advice.
Projections
| 2017 | 2018 | 2019 | 2020 | Longer run | |
|---|---|---|---|---|---|
| Real GDP growth | 2.5 was 2.4 | 2.5 was 2.1 | 2.1 was 2.0 | 2.0 was 1.8 | 1.8 |
| Unemployment rate | 4.1 was 4.3 | 3.9 was 4.1 | 3.9 was 4.1 | 4.0 was 4.2 | 4.6 |
| PCE inflation | 1.7 was 1.6 | 1.9 | 2.0 | 2.0 | 2.0 |
| Core PCE inflation | 1.5 | 1.9 | 2.0 | 2.0 | |
| Federal funds rate | 1.4 | 2.1 | 2.7 | 3.1 was 2.9 | 2.8 |
Median projections of FOMC participants; previous: September.
Each dot is one participant's projection of the federal funds rate (%) at the end of each year and in the longer run.
December September median September median
Scroll the chart sideways for the later years.
Implementation Note
The settings that put the decision into effect: the interest rate paid on reserves, the FOMC's instructions to the New York Fed's trading desk, and the discount rate. Changes are marked the same way as in the statement.
- The Board of Governors of the Federal Reserve System voted unanimously to
maintainraise the interest rate paid on required and excess reserve balancesat 1.25 percent.to 1.50 percent, effective December 14, 2017. - As part of its policy decision, the Federal Open Market Committee voted to authorize and direct the Open Market Desk at the Federal Reserve Bank of New York, until instructed otherwise, to execute transactions in the System Open Market Account in accordance with the following domestic policy directive: "Effective
November 2,December 14, 2017, the Federal Open Market Committee directs the Desk to undertake open market operations as necessary to maintain the federal funds rate in a target range of11-1/4 to1‑1/41-1/2 percent, including overnight reverse repurchase operations (and reverse repurchase operations with maturities of more than one day when necessary to accommodate weekend, holiday, or similar trading conventions) at an offering rate of1.001.25 percent, in amounts limited only by the value of Treasury securities held outright in the System Open Market Account that are available for such operations and by a per-counterparty limit of $30 billion per day. The Committee directs the Desk to continue rolling over at auction the amount of principal payments from the Federal Reserve's holdings of Treasury securities maturing duringeach calendar monthDecember that exceeds $6 billion, and to continue reinvesting in agency mortgage-backed securities the amount of principal payments from the Federal Reserve's holdings of agency debt and agency mortgage-backed securities received during December that exceeds $4 billion. Effective in January, the Committee directs the Desk to roll over at auction the amount of principal payments from the Federal Reserve's holdings of Treasury securities maturing during each calendar month that exceeds$4$12 billion, and to reinvest in agency mortgage-backed securities the amount of principal payments from the Federal Reserve's holdings of agency debt and agency mortgage-backed securities received during each calendar month that exceeds $8 billion. Small deviations from these amounts for operational reasons are acceptable. The Committee also directs the Desk to engage in dollar roll and coupon swap transactions as necessary to facilitate settlement of the Federal Reserve's agency mortgage-backed securities transactions." - In a related action, the Board of Governors of the Federal Reserve System voted unanimously to approve a 1/4 percentage point increase in the
establishment of theprimary credit rateatto 2.00 percent, effective December 14, 2017. In taking this action, theexisting levelBoard approved requests to establish that rate submitted by the Boards of1.75 percent.Directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Kansas City, Dallas, and San Francisco.
Press conference
December 13, 2017, 2:30 p.m. ET · Read the transcript
What Yellen said that the statement didn't
- The chair said the economy grew at a solid 3¼ percent pace in the second and third quarters of the year.
- The chair said job gains averaged 170,000 per month over the three months ending in November, well above the pace needed to absorb new labor force entrants.
- The chair said the median projection for the federal funds rate is 2.1 percent at the end of 2018, 2.7 percent at the end of 2019, and 3.1 percent in 2020.
- The chair said the statement no longer mentions the balance sheet normalization program because it is proceeding, and the Fed would resume reinvestments only if a material economic deterioration warranted a sizable rate cut.
- The chair said participants generally factored in prospective tax policy changes as boosting both consumer and capital spending, with some potential to boost aggregate supply, but with considerable uncertainty about the effects.
Summary generated automatically from the transcript and the statement.