March 21, 2018
January 31, 2018
Jerome H. Powell
March 21, 2018 FOMC Statement
FOMC statement
Federal Reserve issues FOMC statement
For release at 2:00 p.m. EST EDT
Information received since the Federal Open Market Committee met in December January indicates that the labor market has continued to strengthen and that economic activity has been rising at a solid moderate rate. Gains in employment, household spending, and business fixed investment Job gains have been solid, strong in recent months, and the unemployment rate has stayed low. Recent data suggest that growth rates of household spending and business fixed investment have moderated from their strong fourth-quarter readings. On a 12-month basis, both overall inflation and inflation for items other than food and energy have 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. The economic outlook has strengthened in recent months. The Committee expects that, with further gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace in the medium term and labor market conditions will remain strong. Inflation on a 12‑month 12-month basis is expected to move up this year in coming months 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 maintain raise the target range for the federal funds rate at 1-1/4 to 1‑1/2 1-1/2 to 1-3/4 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; Jerome H. Powell, Chairman; 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, March 21, 2018
Our summary
What changed
- The FOMC raised the target range for the federal funds rate to 1-1/2 to 1-3/4 percent, from 1-1/4 to 1-1/2 percent.
- The statement upgraded the economic assessment, noting that job gains have been strong and that the economic outlook has strengthened in recent months.
- It added that household spending and business fixed investment growth have moderated from strong fourth-quarter readings.
- The description of expected inflation changed from 'move up this year' to 'move up in coming months'.
- The vote was 8-0, with no dissents, and marked the first meeting chaired by Jerome H. Powell.
Implications
The upgraded outlook and the change in inflation timing suggest the FOMC sees conditions warranting continued gradual rate increases, possibly sooner than previously expected. Markets may interpret the unanimous decision as a signal of confidence in the policy path, with the phrase 'further gradual increases' retained to indicate ongoing normalization.
Summary generated automatically from the statements. Not investment advice.
Projections
| 2018 | 2019 | 2020 | Longer run | |
|---|---|---|---|---|
| Real GDP growth | 2.7 was 2.5 | 2.4 was 2.1 | 2.0 | 1.8 |
| Unemployment rate | 3.8 was 3.9 | 3.6 was 3.9 | 3.6 was 4.0 | 4.5 was 4.6 |
| PCE inflation | 1.9 | 2.0 | 2.1 was 2.0 | 2.0 |
| Core PCE inflation | 1.9 | 2.1 was 2.0 | 2.1 was 2.0 | |
| Federal funds rate | 2.1 | 2.9 was 2.7 | 3.4 was 3.1 | 2.9 was 2.8 |
Median projections of FOMC participants; previous: December.
Each dot is one participant's projection of the federal funds rate (%) at the end of each year and in the longer run.
March December median December 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 1.50to 1.75 percent, effectiveFebruary 1,March 22, 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
February 1,March 22, 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 of1-1/4 to1-1/2 to 1-3/4 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 of1.251.50 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 March that exceeds $12 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 March that exceeds $8 billion. Effective in April, 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$18 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$12 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 2.25 percent, effective March 22, 2018. In taking this action, theexisting levelBoard approved requests to establish that rate submitted by the Boards of2.00 percent.Directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, St. Louis, Kansas City, Dallas, and San Francisco.
Press conference
March 21, 2018, 2:30 p.m. ET · Read the transcript
What Powell said that the statement didn't
- Powell said the median projection for the federal funds rate is 2.1 percent at the end of 2018, 2.9 percent at the end of 2019, and 3.4 percent at the end of 2020.
- Powell stated that the median projection for real GDP growth is 2.7 percent in 2018, 2.4 percent in 2019, and 2 percent in 2020.
- Powell said the median projection for the unemployment rate is 3.8 percent in the fourth quarter of 2018 and 3.6 percent over the next two years.
- Powell said the balance sheet reduction program, which began in October, is proceeding smoothly and that the FOMC does not intend to alter it unless there is a very significant and unexpected weakening in the outlook.
- Powell said that a number of FOMC participants brought up the issue of tariffs, and that trade policy has become a concern for business leaders going forward.
Summary generated automatically from the transcript and the statement.