Daily News: September 22, 2016

Fed Holds Rates, Notes ‘Soft’ Business Fixed Investment


The Federal Open Market Committee (FOMC) said information received since the committee’s meeting in July indicates that the labor market has continued to strengthen, and growth of economic activity has picked up from the modest pace seen in the first half of this year. Although the unemployment rate is little changed in recent months, job gains have been solid, on average.

The FOMC noted that although household spending has been growing strongly, business fixed investment has remained soft. Inflation has continued to run below the committee’s 2% longer-run objective, partly reflecting earlier declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation remain low; most survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months, the committee said.

Against this backdrop, the FOMC decided to maintain the target range for the federal funds rate at 1/4% to 1/2%. The committee judges that the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives. The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2% inflation.

According to the news release, the decision to keep interest rates low was supported by seven members of the committee including Chairman Janet L. Yellen. Dissenting votes were cast by three members each of whom preferred to raise the target range for the federal funds rate to 1/2% to 3/4%.