May 1, 2018

Northwest FCS News

Meeting Date:  May 1-2, 2018
Economic Highlights
Labor markets strong and unemployment rate low; economic activity rising; household spending and business fixed investment growing, but at a slower rate than the fourth quarter of 2017, and the 2.0% inflation goal remains unrealized.
  • Information received since the Federal Open Market Committee met in March indicates that the labor market has continued to strengthen and that economic activity has been rising at a moderate rate.
  • Job gains have been strong, on average, in recent months, and the unemployment rate has stayed low.
  • Recent data suggest that growth of household spending moderated from its strong fourth-quarter pace, while business fixed investment continued to grow strongly.
  • On a 12-month basis, both overall inflation and inflation for items other than food and energy have moved close to 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.
Policy Announcements
Federal funds rate unchanged, but the federal funds future market – where investors basically place a wager on the number of rate hikes – indicate there is a 49% probability of three more rate hikes this year.
  • The Committee decided to leave the target range for the federal funds rate at 1.50 - 1.75 percent
  • The Committee declared that the economy is currently balanced. The risk of higher unemployment or higher inflation is roughly equal, but the Committee continues to monitor inflation developments closely. This is an indication that the Committee views that there is still a chance that the economy may overheat.
  • Even though rates were not increased, the FOMC said the stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation.
Forward Guidance
Fed warns, again, to expect gradual rate hikes and that the path of future rates will remain below the level normally expected in the longer run. In addition, they continue to pursue a symmetrical inflation goal. A symmetrical means the desired rate of inflation is neither below nor above 2.0%.
  • 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 objectives of maximum employment and 2 percent inflation. 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 carefully monitor actual and expected inflation developments relative to its symmetric inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant further gradual increases in the federal funds rate.
  • However, the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. The actual path of the federal funds rate will depend on the economic outlook as informed by incoming data in determining the timing and size of future adjustments to the target range for the federal funds rate.
Voting Results
No dissenting vote at this meeting.
Voting for the FOMC monetary policy action were  Jerome H. Powell, Chairman; William C. Dudley, Vice Chairman; Thomas I. Barkin; Raphael W. Bostic; Lael Brainard; Loretta J. Mester; Randal K. Quarles; and John C. Williams.
Next Meeting:  June 12-13, 2018


The preceding information contains excerpts from an official published statement on the Federal Open Market Committee’s May 1-2, 2018 meeting.  For full text, please visit the Federal Reserve website.