July 31, 2019
June 19, 2019
Jerome H. Powell
July 31, 2019 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 May June indicates that the labor market remains strong and that economic activity is has been rising at a moderate rate. Job gains have been solid, on average, in recent months, and the unemployment rate has remained low. Although growth of household spending appears to have has picked up from earlier in the year, indicators growth of business fixed investment have has been soft. On a 12-month basis, overall inflation and inflation for items other than food and energy are running below 2 percent. Market-based measures of inflation compensation have declined; remain low; survey-based measures of longer-term inflation expectations are little changed.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. In support light of these goals, the implications of global developments for the economic outlook as well as muted inflation pressures, the Committee decided to maintain lower the target range for the federal funds rate at 2-1/4 to 2-1/2 percent. The Committee continues 2 to 2-1/4 percent. This action supports the Committee's view that sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective as are the most likely outcomes, but uncertainties about this outlook have increased. In light of these uncertainties and muted inflation pressures, remain. As the Committee contemplates the future path of the target range for the federal funds rate, it will closely continue to monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2 percent objective.
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.
The Committee will conclude the reduction of its aggregate securities holdings in the System Open Market Account in August, two months earlier than previously indicated.
Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michelle W. Bowman; Lael Brainard; James Bullard; Richard H. Clarida; Charles L. Evans; Esther L. George; and Randal K. Quarles; and Eric S. Rosengren. Quarles. Voting against the action was James Bullard, were Esther L. George and Eric S. Rosengren, who preferred at this meeting to lower maintain the target range for the federal funds rate by 25 basis points. at 2-1/4 to 2-1/2 percent.
Implementation Note issued June 19, July 31, 2019
Our summary
What changed
- The FOMC lowered the federal funds rate target range from 2-1/4 to 2-1/2 percent to 2 to 2-1/4 percent, the first cut since 2008.
- The decision was explicitly in response to global developments and muted inflation pressures, replacing previous language about monitoring uncertainties.
- The FOMC announced it will conclude balance sheet runoff in August, two months earlier than previously indicated.
- The vote was 8-2, with Esther L. George and Eric S. Rosengren dissenting in favor of maintaining the previous range, while James Bullard joined the majority after dissenting in June.
Implications
The shift to an explicit rate cut and earlier balance sheet normalization suggests a more accommodative stance to buffer against global headwinds and low inflation. Markets may interpret this as a signal of potential further easing if conditions warrant, given the FOMC's revised forward guidance.
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
maintainlower the interest rate paid on required and excess reserve balancesat 2.35to 2.10 percent, effectiveJune 20,August 1, 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
June 20,August 1, 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 of2-1/42 to2-1/22-1/4 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 of2.252.00 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.TheEffective August 1, 2019, the Committee directs the Desk tocontinue rollingroll over at auctionthe amount ofall principal payments from the Federal Reserve's holdings of Treasury securitiesmaturing during each calendar month that exceeds $15 billion,and tocontinue reinvesting in agency mortgage-backed securities the amount ofreinvest all principal payments from the Federal Reserve's holdings of agency debt and agency mortgage-backed securities received during each calendar month. Principal payments from agency debt and agency mortgage-backed securities up to $20 billion per monththat exceedswill be reinvested in Treasury securities to roughly match the maturity composition of Treasury securities outstanding; principal payments in excess of $20billion.billion per month will continue to be reinvested in agency mortgage-backed securities. 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 decrease in the
establishment of theprimary credit rateatto 2.75 percent, effective August 1, 2019. In taking this action, theexisting levelBoard approved requests to establish that rate submitted by the Boards of3.00 percent.Directors of the Federal Reserve Banks of Philadelphia, Chicago, St. Louis, Dallas, and San Francisco.
Press conference
July 31, 2019, 2:30 p.m. ET · Read the transcript
What Powell said that the statement didn't
- The chair described the rate cut as a "midcycle adjustment to policy," contrasting it with the beginning of a lengthy cutting cycle.
- The chair said the FOMC's actions over the year, including moving from expected rate increases to a patient stance and then to the cut, have eased financial conditions and supported the economy.
- The chair noted that the median Committee participant's assessments of the neutral rate of interest and the longer-run normal rate of unemployment have declined this year.
- The chair stated that trade policy uncertainty is a factor the Fed is "learning by doing" and that the Fed plays no role in assessing or evaluating trade policies.
- The chair said that business contacts report ongoing uncertainty is making some companies more cautious about capital spending, and that weak global growth and trade tensions are having an effect on the U.S. economy.
Summary generated automatically from the transcript and the statement.