Daily News: July 28, 2016

FOMC: Only Gradual Increases in Fed Funds Rate Expected


At their most recent meeting, Federal Reserve policymakers said the labor market had strengthened and that economic activity has been expanding at a moderate rate. Job gains were strong in June following weak growth in May. On balance, payrolls and other labor market indicators point to some increase in labor utilization in recent months. Household spending has been growing strongly but business fixed investment has been soft.

Against this backdrop, the committee decided to maintain the target range for the federal funds rate at 1/4 to 1/2%. The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2% inflation.

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% 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. In light of the current shortfall of inflation from 2%, the committee will carefully monitor actual and expected progress toward its inflation goal.

The committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.