October 30, 2019
September 18, 2019
Jerome H. Powell
October 30, 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 July September 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 household spending has been rising at a strong pace, business fixed investment and exports have weakened. remain weak. 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 1-3/4 1-1/2 to 2 1-3/4 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 are the most likely outcomes, but uncertainties about this outlook remain. As the 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 it assesses the appropriate to sustain path of the expansion, with a strong labor market and inflation near its symmetric 2 percent objective. target range for the federal funds rate.
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 James Bullard, who preferred at this meeting to lower the target range for the federal funds rate to 1-1/2 to 1-3/4 percent; and action were: Esther L. George and Eric S. Rosengren, who preferred at this meeting to maintain the target range at 2 1-3/4 percent to 2-1/4 2 percent.
Implementation Note issued September 18, October 30, 2019
Our summary
What changed
- The FOMC lowered the target range for the federal funds rate by 25 basis points to 1-1/2 to 1-3/4 percent.
- Language on business fixed investment and exports changed from 'have weakened' to 'remain weak'.
- The forward guidance was revised to say the FOMC will monitor incoming information as it assesses the appropriate path of the target range.
- The voting alignment changed: James Bullard now votes with the majority, while Esther George and Eric Rosengren dissented, preferring to maintain the range at 1-3/4 to 2 percent.
Implications
The shift from 'have weakened' to 'remain weak' suggests the FOMC sees the weakness in investment and exports as persisting rather than a new development.
The revised forward guidance removes the phrase 'will act as appropriate' and instead emphasizes assessing the appropriate path, indicating a more data-dependent and less pre-committed stance.
The unanimous support for the cut, with only two dissents preferring no change, signals broad agreement on the need for further accommodation.
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 lower the interest rate paid on required and excess reserve balances to
1.801.55 percent, effectiveSeptember 19,October 31, 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
September 19,October 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 1-1/2 to 1-3/4 percent. In light of recent and expected increases in the Federal Reserve's non-reserve liabilities, the Committee directs the Desk to2 percent, includingpurchase Treasury bills at least into the second quarter of next year to maintain over time ample reserve balances at or above the level that prevailed in early September 2019. The Committee also directs the Desk to conduct term and overnight repurchase agreement operations at least through January of next year to ensure that the supply of reserves remains ample even during periods of sharp increases in non-reserve liabilities, and to mitigate the risk of money market pressures that could adversely affect policy implementation. In addition, the Committee directs the Desk to conduct 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 of1.701.45 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 all principal payments from the Federal Reserve's holdings of Treasury securities and to continue 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
2.502.25 percent, effectiveSeptember 19,October 31, 2019. In taking this action, the Board approved requests to establish that rate submitted by the Boards of Directors of the Federal Reserve Banks ofChicago, Minneapolis, Dallas,Minneapolis and San Francisco.
Press conference
October 30, 2019, 2:30 p.m. ET · Read the transcript
What Powell said that the statement didn't
- The Fed has cut interest rates three times this year, with today's reduction bringing the target range to 1½ to 1¾ percent.
- The chair described the current stance of monetary policy as "likely to remain appropriate" as long as incoming data broadly align with the outlook for moderate growth, a strong labor market, and inflation near 2 percent.
- Risks to the outlook have moved in a positive direction due to a potential phase-one trade agreement with China and a reduced likelihood of a no-deal Brexit.
- The Fed's Treasury bill purchases and temporary open market operations are technical measures to maintain ample reserves, not a change in policy stance or quantitative easing.
- The policy framework review is ongoing and expected to conclude around the middle of next year, focusing on ways to make the symmetric 2 percent inflation objective more credible.
Summary generated automatically from the transcript and the statement.