January 30, 2019
December 19, 2018
Statement·Presser·Minutes·Policy
Jerome H. Powell
January 30, 2019 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 November December indicates that the labor market has continued to strengthen and that economic activity has been rising at a strong solid rate. Job gains have been strong, on average, in recent months, and the unemployment rate has remained low. Household spending has continued to grow strongly, while growth of business fixed investment has moderated from its rapid pace earlier in the last year. On a 12-month basis, both overall inflation and inflation for items other than food and energy remain near 2 percent. Indicators Although market-based measures of inflation compensation have moved lower in recent months, survey-based measures of longer-term inflation expectations are little changed, on balance. changed.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The In support of these goals, the Committee judges that some further gradual increases in decided to maintain the target range for the federal funds rate will be consistent with at 2-1/4 to 2-1/2 percent. The Committee continues to view sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective over as the medium term. The Committee judges that risks to the economic outlook are roughly balanced, but will continue to monitor most likely outcomes. In light of global economic and financial developments and assess their implications muted inflation pressures, the Committee will be patient as it determines what future adjustments to the target range for the economic outlook. federal funds rate may be appropriate to support these outcomes.
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; James Bullard; Richard H. Clarida; Mary C. Daly; Loretta J. Mester; and Charles L. Evans; Esther L. George; Randal K. Quarles. Quarles; and Eric S. Rosengren.
Implementation Note issued January 30, 2019
In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 2-1/4 to 2‑1/2 percent.
Implementation Note issued December 19, 2018
Our summary
What changed
- The FOMC held the federal funds rate at 2-1/4 to 2-1/2 percent, instead of raising it as in December.
- Economic activity is now described as rising at a 'solid' rate, down from 'strong' in the previous statement.
- Added that market-based inflation compensation has moved lower, while survey-based expectations are little changed.
- Replaced the forward guidance about 'some further gradual increases' with a pledge to be 'patient' regarding future adjustments.
- The voting roster changed: Barkin, Daly, and Mester were replaced by Bullard, Evans, and George.
Implications
The shift to 'patient' language signals a pause in rate hikes, likely in response to global risks and muted inflation. Markets may interpret this as a more dovish stance, reducing expectations for near-term tightening.
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 maintain the interest rate paid on required and excess reserve balances at 2.40 percent, effective January 31, 2019.
- 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 20, 2018,January 31, 2019, 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 2-1/4 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 of 2.25 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 the establishment of the primary credit rate at the existing level of 3.00 percent.
The Board of Governors of the Federal Reserve System voted unanimously to raise the interest rate paid on required and excess reserve balances to 2.40 percent, effective 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.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 3.00 percent, effective December 20, 2018. 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, Cleveland, Richmond, Atlanta, Chicago, and San Francisco.
Press conference
January 30, 2019, 2:30 p.m. ET · Read the transcript
What Powell said that the statement didn't
- The chair said the FOMC decided to maintain the target range for the federal funds rate at 2-1/4 to 2-1/2 percent, but the statement already says this.
- The chair said the policy rate is now in the range of the FOMC's estimates of neutral.
- The chair said the risk of financial imbalances has receded, as indicators of financial risk appetite have moved closer to historical norms.
- The chair said the FOMC decided to continue indefinitely using its current operating procedure for implementing monetary policy, often called a "floor system" or "abundant reserves system."
- The chair said estimates of reserve demand are considerably higher than estimates of a year or so ago, implying balance sheet normalization will be completed sooner and with a larger balance sheet than previously estimated.
Summary generated automatically from the transcript and the statement.