December 19, 2018
November 08, 2018
Jerome H. Powell
December 19, 2018 FOMC Statement
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 September November 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 declined. remained low. Household spending has continued to grow strongly, while growth of business fixed investment has moderated from its rapid pace earlier in the year. 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 judges that some 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 The Committee judges that risks to the economic outlook appear are roughly balanced. balanced, but will continue to monitor global economic and financial developments and assess their implications for the economic outlook.
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 2 to 2-1/4 to 2‑1/2 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; Michelle W. Bowman; Lael Brainard; Richard H. Clarida; Mary C. Daly; Loretta J. Mester; and Randal K. Quarles.
Implementation Note issued November 8, December 19, 2018
Our summary
What changed
- The FOMC raised the target range for the federal funds rate to 2-1/4 to 2-1/2 percent, from 2 to 2-1/4 percent.
- The forward guidance changed from 'expects' to 'judges that some further gradual increases' will be consistent with the FOMC's objectives.
- The statement added that the FOMC will continue to monitor global economic and financial developments and assess their implications for the outlook.
- The description of the unemployment rate changed from 'has declined' to 'has remained low'.
- The voting membership changed: Michelle W. Bowman replaced Thomas I. Barkin as a voter.
Implications
The shift from 'expects' to 'judges' suggests a slightly less committed stance on future rate hikes, while the added monitoring language signals heightened attention to global risks. Markets may interpret this as a more data-dependent and cautious approach to further tightening.
Summary generated automatically from the statements. Not investment advice.
Projections
| 2018 | 2019 | 2020 | 2021 | Longer run | |
|---|---|---|---|---|---|
| Real GDP growth | 3.0 was 3.1 | 2.3 was 2.5 | 2.0 | 1.8 | 1.9 was 1.8 |
| Unemployment rate | 3.7 | 3.5 | 3.6 was 3.5 | 3.8 was 3.7 | 4.4 was 4.5 |
| PCE inflation | 1.9 was 2.1 | 1.9 was 2.0 | 2.1 | 2.1 | 2.0 |
| Core PCE inflation | 1.9 was 2.0 | 2.0 was 2.1 | 2.0 was 2.1 | 2.0 was 2.1 | |
| Federal funds rate | 2.4 | 2.9 was 3.1 | 3.1 was 3.4 | 3.1 was 3.4 | 2.8 was 3.0 |
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 2.20to 2.40 percent, effectiveNovember 9,December 20, 2018. Setting the interest rate paid on required and excess reserve balances 10 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
November 9,December 20, 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 of2 to2-1/4 to 2-1/2 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 of2.002.25 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 aper-counterpartyper‑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 each calendar month that exceeds $30 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 each calendar month that exceeds $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 3.00 percent, effective December 20, 2018. In taking this action, theexisting levelBoard approved requests to establish that rate submitted by the Boards of2.75 percent.Directors of the Federal Reserve Banks of Boston, Cleveland, Richmond, Atlanta, Chicago, and San Francisco.
Press conference
December 19, 2018, 2:30 p.m. ET · Read the transcript
What Powell said that the statement didn't
- The chair said the FOMC had lowered its median projection for 2019 rate increases from about three to two.
- The chair said the federal funds rate target range was now at the lower end of the range of estimates of the longer-run normal rate.
- The chair said the balance sheet runoff was on "automatic pilot" and he did not see the FOMC changing that approach.
- The chair said political considerations had played no role in the FOMC's discussions or decisions on monetary policy.
- The chair said the FOMC had not declared victory on achieving inflation symmetrically around 2 percent.
Summary generated automatically from the transcript and the statement.