The Federal Reserve left interest rates unchanged at its January 2016 meeting. The Fed noted that household spending and business fixed investment have been increasing at moderate rates in recent months, and the housing sector has improved further. However, the Fed said, net exports have been soft and inventory investment slowed. A range of recent labor market indicators, including strong job gains, points to some additional decline in under-utilization of labor resources.
Inflation has continued to run below the committee’s 2% longer-run objective, partly reflecting declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation declined further; survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months.
The committee is closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation, and for the balance of risks to the outlook.
Given the economic outlook, the committee decided, in a unanimous vote, to maintain the target range for the federal funds rate at 0.25% to 0.50%. The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2% inflation.