December 13, 2016
Northwest FCS News
Meeting Date: December 13-14, 2016
Job gains have been respectable in recent months and the official unemployment rate has declined. Household spending is rising slowly, but business fixed investment has remained sluggish.
“Information received since the Federal Open Market Committee met in November indicates that the labor market has continued to strengthen and that economic activity has been expanding at a moderate pace since mid-year. Inflation has increased since earlier this year but is still below the Committee's 2 percent longer-run objective, partly reflecting earlier declines in energy prices and in prices of non-energy imports.”
Fed raises federal funds rate by 0.25% to a new range of 0.50-0.75%.
“In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 1/2 to 3/4 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a return to 2 percent inflation.”
Fed’s Security Holdings
No change from November 2016 FOMC meeting. Total dollars injected into the economy from the Large Scale Asset Purchase programs to remain constant.
“The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction, and it anticipates doing so until normalization of the level of the federal funds rate is well under way. This policy, by keeping the Committee's holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.”
The Committee expects that economic conditions will warrant only gradual increases in rates; the federal funds rate will most likely stay below expected longer-term levels for some time.
“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 actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.”
No dissenting votes this meeting.
Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; James Bullard; Stanley Fischer; Esther L. George; Loretta J. Mester; Jerome H. Powell; Eric Rosengren; and Daniel K. Tarullo.
Next Meeting: January 31-February 1, 2017
The preceding information contains excerpts from an official published statement on the Federal Open Market Committee’s December 13-14, 2016 meeting. For full text, please visit the Federal Reserve website.