January 31, 2018 FOMC Statement

Target range 1.25–1.50% unchanged Vote 9–0 Tone: Balanced +0.05

At a glance·Statement·Our summary·Implementation Note

FOMC statement

Federal Reserve issues FOMC statement

For release at 2:00 p.m. EST

Information received since the Federal Open Market Committee met in ~~November~~ December indicates that the labor market has continued to strengthen and that economic activity has been rising at a solid rate. ~~Averaging through hurricane-related fluctuations, job gains~~ Gains in employment, household spending, and business fixed investment have been solid, and 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.~~ stayed low. On a 12-month basis, both overall inflation and inflation for items other than food and energy have ~~declined this year and are running~~ continued to run below 2 percent. Market-based measures of inflation compensation have increased in recent months but 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 have affected economic activity, employment, and inflation in recent months but have not materially altered the outlook for the national economy. Consequently, the The Committee ~~continues to expect~~ expects that, with further gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market conditions will remain strong. Inflation on a 12‑month basis is expected to ~~remain somewhat below 2 percent in the near term but~~ move up this year and 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 ~~raise~~ maintain the target range for the federal funds rate to at 1-1/4 to 1‑1/2 percent. The stance of monetary policy remains accommodative, thereby supporting 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 further 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 Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Thomas I. Barkin; Raphael W. Bostic; Lael Brainard; Loretta J. Mester; Jerome H. Powell; Randal K. Quarles; and John C. Williams.

Implementation Note issued January 31, 2018

Voting for the FOMC monetary policy action were Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Patrick Harker; Robert S. Kaplan; 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 December 13, 2017~~

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Our summary

What changed

The FOMC decided to maintain the federal funds rate target range at 1-1/4 to 1-1/2 percent, after raising it in December.
Forward guidance now says 'further gradual adjustments' instead of 'gradual adjustments,' and later 'further gradual increases' instead of 'gradual increases.'
Economic description was updated: employment, household spending, and business fixed investment are now described as solid; hurricane-related language was dropped.
Inflation language now says it is expected to 'move up this year' rather than 'remain somewhat below 2 percent in the near term.'
Market-based inflation compensation is said to have increased in recent months; the vote was unanimous, with no dissents listed.

Implications

The shift to 'further' gradual increases signals that the FOMC sees the path of rate hikes continuing, likely at a measured pace, but the pause this meeting suggests no urgency.

The upgraded inflation expectation and removal of hurricane references indicate the FOMC views the economy as on a firmer footing, possibly reducing downside concerns.

The unanimous vote suggests broad agreement on holding rates steady while keeping the door open for future hikes, which markets may interpret as a balanced, data-dependent stance.

Summary generated automatically from the statements. Not investment advice.

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 ~~raise~~ maintain the interest rate paid on required and excess reserve balances to at 1.50 percent, effective ~~December 14, 2017.~~ February 1, 2018.
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 ~~December 14, 2017,~~ February 1, 2018, 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 of 1-1/4 to 1-1/2 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 of 1.25 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 during December 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 $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 the establishment of the primary credit rate at the existing level of 2.00 percent.
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 primary credit rate to 2.00 percent, effective December 14, 2017. In taking this action, the Board approved requests to establish that rate submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Kansas City, Dallas, and San Francisco.

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