December 11, 2019
October 30, 2019
Jerome H. Powell
December 11, 2019 FOMC Statement
FOMC statement
Federal Reserve issues FOMC statement
For release at 2:00 p.m. EDT EST
Information received since the Federal Open Market Committee met in September October 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 remain weak. On a 12-month 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 The Committee decided to lower maintain the target range for the federal funds rate at 1‑1/2 to 1-1/2 to 1-3/4 percent. This action supports the Committee's view The Committee judges that the current stance of monetary policy is appropriate to support 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. objective. The Committee will continue to monitor the implications of incoming information for the economic outlook outlook, including global developments and muted inflation pressures, as it assesses the appropriate path of the 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; John C. Williams, Vice Chair; Michelle W. Bowman; Lael Brainard; James Bullard; Richard H. Clarida; Charles L. Evans; and Randal K. Quarles. Voting against this action were: Esther L. George George; Randal K. Quarles; and Eric S. Rosengren, who preferred at this meeting to maintain the target range at 1-3/4 percent to 2 percent. Rosengren.
Implementation Note issued October 30, December 11, 2019
Our summary
What changed
- The FOMC decided to maintain the target range for the federal funds rate at 1-1/2 to 1-3/4 percent, rather than lowering it as in October.
- The statement now says the current stance of monetary policy is appropriate, replacing the previous language about supporting the outlook with uncertainties.
- The FOMC will continue to monitor global developments and muted inflation pressures, which were previously cited as reasons for the rate cut.
- The vote was unanimous, with Esther L. George and Eric S. Rosengren no longer dissenting; they had previously preferred to hold rates higher.
Implications
The shift to a neutral stance suggests the FOMC sees the current policy as well-calibrated, likely pausing further cuts unless the outlook deteriorates. The unanimous vote signals internal agreement, reducing near-term policy uncertainty.
Summary generated automatically from the statements. Not investment advice.
Projections
| 2019 | 2020 | 2021 | 2022 | Longer run | |
|---|---|---|---|---|---|
| Real GDP growth | 2.2 | 2.0 | 1.9 | 1.8 | 1.9 |
| Unemployment rate | 3.6 was 3.7 | 3.5 was 3.7 | 3.6 was 3.8 | 3.7 was 3.9 | 4.1 was 4.2 |
| PCE inflation | 1.5 | 1.9 | 2.0 | 2.0 | 2.0 |
| Core PCE inflation | 1.6 was 1.8 | 1.9 | 2.0 | 2.0 | |
| Federal funds rate | 1.6 was 1.9 | 1.6 was 1.9 | 1.9 was 2.1 | 2.1 was 2.4 | 2.5 |
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
lowermaintain the interest rate paid on required and excess reserve balancestoat 1.55 percent, effectiveOctober 31,December 12, 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
October 31,December 12, 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 topurchasecontinue purchasing Treasury bills at least into the second quarter ofnext year2020 to maintain over time ample reserve balances at or above the level that prevailed in early September 2019. The Committee also directs the Desk toconductcontinue conducting term and overnight repurchase agreement operations at least through Januaryof next year2020 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 of 1.45 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 inthe establishment of the primary credit rateto 2.25 percent, effective October 31, 2019. In taking this action,at theBoard approved requests to establish that rate submitted by the Boardsexisting level ofDirectors of the Federal Reserve Banks of Minneapolis and San Francisco.2.25 percent.
Press conference
December 11, 2019, 2:30 p.m. ET · Read the transcript
What Powell said that the statement didn't
- Chair Powell opened the press conference by paying tribute to the late former Fed Chair Paul Volcker, praising his character and his role in taming double-digit inflation.
- He noted that the economic expansion is in its 11th year, the longest on record, and that the median FOMC projection for real GDP growth remains near 2 percent over the next few years.
- Powell stated that to raise rates, he would need to see inflation that is persistent and a significant move-up in inflation, adding that this is his personal view rather than a codified Committee policy.
- He explained that the relationship between unemployment and inflation has weakened considerably over the decades, and that the wage Phillips curve has a higher coefficient than the price Phillips curve.
- Powell said the Fed’s Treasury bill purchases and repo operations are technical, aimed at maintaining ample reserves, and that the Fed is prepared to adjust the details of these operations, including potentially buying other short-term coupon securities if needed.
Summary generated automatically from the transcript and the statement.