September 18, 2019
July 31, 2019
Jerome H. Powell
September 18, 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 June July indicates that the labor market remains strong and that economic activity 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 has picked up from earlier in the year, growth of been rising at a strong pace, business fixed investment has been soft. and exports have weakened. 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 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 light of the implications of global developments for the economic outlook as well as muted inflation pressures, the Committee decided to lower the target range for the federal funds rate to 2 1-3/4 to 2-1/4 2 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 are the most likely outcomes, but uncertainties about this outlook remain. As the Committee contemplates the future path of the target range for the federal funds rate, it will 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.
Voting for the monetary policy action were Jerome H. Powell, Chair; Chair, John C. Williams, Vice Chair; Michelle W. Bowman; Lael Brainard; James Bullard; Richard H. Clarida; Charles L. Evans; and Randal K. Quarles. Voting against the action were Esther L. George and Eric S. Rosengren, James Bullard, who preferred at this meeting to maintain lower the target range for the federal funds rate to 1-1/2 to 1-3/4 percent; and Esther L. George and Eric S. Rosengren, who preferred to maintain the target range at 2-1/4 2 percent to 2-1/2 2-1/4 percent.
Implementation Note issued July 31, September 18, 2019
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.
Our summary
What changed
- The FOMC lowered the federal funds rate target range by 25 basis points to 1-3/4 to 2 percent.
- The statement now notes that household spending has been rising at a strong pace, while business fixed investment and exports have weakened, replacing the previous mention of soft business investment.
- The sentence about concluding the reduction of securities holdings in August was removed, indicating the balance sheet runoff has ended.
- The vote split changed: James Bullard dissented preferring a larger cut, while Esther George and Eric Rosengren dissented preferring to hold rates steady.
Implications
The removal of the balance sheet reduction language suggests the FOMC considers the runoff complete, focusing policy on rate adjustments.
The updated economic description, highlighting strong consumption but weak investment and exports, may signal concerns about trade and global growth, supporting the case for further easing if conditions deteriorate.
The dissents, with one favoring a deeper cut and two favoring no change, indicate internal disagreement about the appropriate pace of easing, which could lead to more cautious forward guidance.
Summary generated automatically from the statements. Not investment advice.
Projections
| 2019 | 2020 | 2021 | 2022 | Longer run | |
|---|---|---|---|---|---|
| Real GDP growth | 2.2 was 2.1 | 2.0 | 1.9 was 1.8 | 1.8 | 1.9 |
| Unemployment rate | 3.7 was 3.6 | 3.7 | 3.8 | 3.9 | 4.2 |
| PCE inflation | 1.5 | 1.9 | 2.0 | 2.0 | 2.0 |
| Core PCE inflation | 1.8 | 1.9 | 2.0 | 2.0 | |
| Federal funds rate | 1.9 was 2.4 | 1.9 was 2.1 | 2.1 was 2.4 | 2.4 | 2.5 |
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 lower the interest rate paid on required and excess reserve balances to
2.101.80 percent, effectiveAugust 1,September 19, 2019. Setting the interest rate paid on required and excess reserve balances 20 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
August 1,September 19, 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 of21-3/4 to2-1/42 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 of2.001.70 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.Effective August 1, 2019, theThe Committee directs the Desk torollcontinue rolling over at auction all principal payments from the Federal Reserve's holdings of Treasury securities and toreinvestcontinue reinvesting 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 month will continue to be reinvested in Treasury securities to roughly match the maturity composition of Treasury securities outstanding; principal payments in excess of $20 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 primary credit rate to
2.752.50 percent, effectiveAugust 1,September 19, 2019. In taking this action, the Board approved requests to establish that rate submitted by the Boards of Directors of the Federal Reserve Banks ofPhiladelphia,Chicago,St. Louis,Minneapolis, Dallas, and San Francisco.
Press conference
September 18, 2019, 2:30 p.m. ET · Read the transcript
What Powell said that the statement didn't
- The chair said the U.S. economy grew at a 2½ percent pace in the first half of the year.
- The chair said the median projection for real GDP growth remains near 2 percent this year and next before edging down toward its estimated longer-run value.
- The chair said the median projection for the unemployment rate remains below 4 percent over the next several years.
- The chair said the median projection for inflation is 1.9 percent this year and 2 percent in 2021.
- The chair said funding pressures in money markets were elevated this week, with the effective federal funds rate rising above the top of its target range yesterday, and that the Fed conducted overnight repurchase operations to counter these pressures.
Summary generated automatically from the transcript and the statement.