September 26, 2018
August 01, 2018
Jerome H. Powell
September 26, 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 June August indicates that the labor market has continued to strengthen and that economic activity has been rising at a strong rate. Job gains have been strong, on average, in recent months, and the unemployment rate has stayed low. Household spending and business fixed investment have grown strongly. On a 12-month basis, both overall inflation and inflation for items other than food and energy remain near 2 percent. Indicators 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 further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market 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 1-3/4 to 2 percent. The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation. 2-1/4 percent.
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 maximum employment objective and its symmetric 2 percent 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.
Voting for the FOMC monetary policy action were: Jerome H. Powell, Chairman; John C. Williams, Vice Chairman; Thomas I. Barkin; Raphael W. Bostic; Lael Brainard; Richard H. Clarida; Esther L. George; Loretta J. Mester; and Randal K. Quarles.
Implementation Note issued August 1, September 26, 2018
Our summary
What changed
- The FOMC raised the target range for the federal funds rate to 2 to 2-1/4 percent, from 1-3/4 to 2 percent.
- The statement now references the August FOMC meeting instead of the June meeting.
- Richard H. Clarida joined the voting members, replacing no one (the previous list had eight voters; the current has nine).
Implications
The rate hike signals continued confidence in the economic outlook and a gradual normalization path.
The addition of a new voter may indicate a shift in the committee's composition but does not alter the overall policy stance.
Summary generated automatically from the statements. Not investment advice.
Projections
| 2018 | 2019 | 2020 | 2021 | Longer run | |
|---|---|---|---|---|---|
| Real GDP growth | 3.1 was 2.8 | 2.5 was 2.4 | 2.0 | 1.8 | 1.8 |
| Unemployment rate | 3.7 was 3.6 | 3.5 | 3.5 | 3.7 | 4.5 |
| PCE inflation | 2.1 | 2.0 was 2.1 | 2.1 | 2.1 | 2.0 |
| Core PCE inflation | 2.0 | 2.1 | 2.1 | 2.1 | |
| Federal funds rate | 2.4 | 3.1 | 3.4 | 3.4 | 3.0 was 2.9 |
Median projections of FOMC participants; previous: June.
Each dot is one participant's projection of the federal funds rate (%) at the end of each year and in the longer run.
September June median June 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 1.95to 2.20 percent, effectiveAugust 2,September 27, 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
August 2,September 27, 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 of1-3/4 to2 to 2-1/4 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 of1.752.00 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 September that exceeds $24 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 September that exceeds $16 billion. Effective in October, 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$24$30 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$16$20 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 2.75 percent, effective September 27, 2018. In taking this action, theexisting levelBoard approved requests to establish that rate submitted by the Boards of2.50 percent.Directors of the Federal Reserve Banks of Boston, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Kansas City, Dallas, and San Francisco.
Press conference
September 26, 2018, 2:30 p.m. ET · Read the transcript
What Powell said that the statement didn't
- The chair said the Fed does not consider political factors in its decisions, responding to a question about President Trump's criticism of rate hikes.
- The chair said the Fed's gradual rate increases help limit the "long and variable lags" problem by allowing observation of how the economy absorbs hikes.
- The chair said the staff judged overall financial stability vulnerabilities to be moderate, with some asset prices in the upper range of historical ranges and leverage in nonfinancial corporates.
- The chair said the Fed has heard a "rising chorus of concerns" from businesses about supply chain disruptions and cost increases due to trade tensions, though aggregate effects are not yet measurable.
- The chair said labor force participation has surprised on the upside, with a sideways trend since late 2013 despite aging, suggesting more labor supply than prior trends indicated.
Summary generated automatically from the transcript and the statement.