June 13, 2018
May 02, 2018
Statement·Presser·Minutes·Policy
Jerome H. Powell
June 13, 2018 FOMC Statement
FOMC statement
Federal Reserve issues FOMC statement
For release at 2:00 p.m. EDT
Information received since the Federal Open Market Committee met in March May indicates that the labor market has continued to strengthen and that economic activity has been rising at a moderate solid rate. Job gains have been strong, on average, in recent months, and the unemployment rate has stayed low. declined. Recent data suggest that growth of household spending moderated from its strong fourth-quarter pace, has picked up, while business fixed investment has continued to grow strongly. On a 12-month basis, both overall inflation and inflation for items other than food and energy have moved close to 2 percent. Market-based measures Indicators 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. The Committee expects that, with that further gradual adjustments increases in the stance target range for the federal funds rate will be consistent with sustained expansion of monetary policy, economic activity will expand at a moderate pace in the medium term and activity, strong labor market conditions will remain strong. Inflation on a 12-month basis is expected to run conditions, and inflation near the Committee's symmetric 2 percent objective over the medium term. Risks to the economic outlook appear roughly balanced.
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 1-1/2 to 1-3/4 to 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 objective and its symmetric 2 percent inflation. inflation objective. 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 Jerome H. Powell, Chairman; William C. Dudley, Vice Chairman; Thomas I. Barkin; Raphael W. Bostic; Lael Brainard; Loretta J. Mester; Randal K. Quarles; and John C. Williams.
Implementation Note issued May 2, June 13, 2018
Our summary
What changed
- The FOMC raised the target range for the federal funds rate to 1-3/4 to 2 percent, from 1-1/2 to 1-3/4 percent.
- Economic activity is now described as rising at a solid rate, up from a moderate rate, and household spending has picked up rather than moderated.
- The unemployment rate has declined, replacing the prior language that it stayed low.
- The FOMC removed the sentence about carefully monitoring inflation developments and the forward guidance that the federal funds rate would remain below longer-run levels for some time.
- The vote was unanimous, with the same eight members voting as in May.
Implications
The removal of the explicit forward guidance on the federal funds rate staying below longer-run levels suggests the FOMC is shifting to a more data-dependent stance, potentially allowing for a faster path of rate increases if the economy continues to strengthen.
The upgraded language on economic activity and household spending, along with the rate hike, signals confidence in the outlook, which markets may interpret as a sign that further gradual increases are likely in the coming meetings.
Summary generated automatically from the statements. Not investment advice.
Projections
| 2018 | 2019 | 2020 | Longer run | |
|---|---|---|---|---|
| Real GDP growth | 2.8 was 2.7 | 2.4 | 2.0 | 1.8 |
| Unemployment rate | 3.6 was 3.8 | 3.5 was 3.6 | 3.5 was 3.6 | 4.5 |
| PCE inflation | 2.1 was 1.9 | 2.1 was 2.0 | 2.1 | 2.0 |
| Core PCE inflation | 2.0 was 1.9 | 2.1 | 2.1 | |
| Federal funds rate | 2.4 was 2.1 | 3.1 was 2.9 | 3.4 | 2.9 |
Median projections of FOMC participants; previous: March.
Each dot is one participant's projection of the federal funds rate (%) at the end of each year and in the longer run.
June March median March 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 1.75to 1.95 percent, effectiveMay 3,June 14, 2018. Setting the interest rate paid on required and excess reserve balances 5 basis points below the top of the target range for the federal funds rate is intended to foster trading in the federal funds market at rates well within the FOMC's target range. - 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
May 3,June 14, 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 of1-1/2 to1-3/4 to 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 of1.501.75 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 June that exceeds $18 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 June that exceeds $12 billion. Effective in July, 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$18$24 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$12$16 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 2.50 percent, effective June 14, 2018. In taking this action, theexisting levelBoard approved requests to establish that rate submitted by the Boards of2.25 percent.Directors of the Federal Reserve Banks of Boston, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco.
Press conference
June 13, 2018, 2:30 p.m. ET · Read the transcript
What Powell said that the statement didn't
- The Fed will hold a press conference after every scheduled FOMC meeting starting in January, a change that does not signal any shift in the timing or pace of rate changes.
- The median projection for the federal funds rate is 2.4 percent at the end of 2018, 3.1 percent at the end of 2019, and 3.4 percent at the end of 2020, modestly above the estimated longer-run level by 2020.
- The FOMC removed language stating that the federal funds rate is likely to remain below longer-run levels for some time, reflecting that the rate will move well within the range of normal long-run estimates over the next year or so.
- The IOER rate is now set 5 basis points below the upper end of the target range to keep the federal funds rate closer to the middle, a technical adjustment with no bearing on the policy path.
- Concerns about changes in trade policy are arising among business contacts, with some reports of companies holding off on investments and hiring, though these are not yet visible in the economic data.
Summary generated automatically from the transcript and the statement.