From the Fed:
In a widely expected move, the FOMC left rates unchanged, citing relatively low levels of inflation and even noting that ex-food and energy, prices have actually declined on a 12-month basis. Household spending and business investment were also highlighted as a bright spot, as was the labor market. The Committee also noted that the long-awaited normalization of the balance sheet will begin “soon,” leaving plenty of flexibility to that implementation.
Rates and Market:
- Fed Funds Target: unchanged at 1 to 1.25%
- Policy Bias: remains accommodative
- Market Reaction: rates fell 2-3bp immediately following the announcement
The FOMC announced the following actions and analysis:
- 9 – 0 vote
- Economic expansion expected to continue at a moderate pace
- Inflation is below the 2% objective and expected to remain so for the near term
- Risks to economic outlook are roughly balanced
- Balance sheet normalization to begin relatively soon
Information received since the Federal Open Market Committee met in June indicates that the labor market has continued to strengthen and that economic activity has been rising moderately so far this year. Job gains have been solid, on average, since the beginning of the year, and the unemployment rate has declined. Household spending and business fixed investment have continued to expand. On a 12-month basis, overall inflation and the measure excluding food and energy prices have declined and are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, and labor market conditions will strengthen somewhat further. Inflation on a 12-month basis is expected to remain somewhat below 2 percent in the near term but to stabilize around the Committee's 2 percent objective over the medium term. Near-term risks to the economic outlook appear roughly balanced, but the Committee is monitoring inflation developments closely.
In view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 1 to 1-1/4 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 percent 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 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 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.
For the time being, 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. The Committee expects to begin implementing its balance sheet normalization program relatively soon, provided that the economy evolves broadly as anticipated; this program is described in the June 2017 Addendum to the Committee's Policy Normalization Principles and Plans.
Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Stanley Fischer; Patrick Harker; Robert S. Kaplan; Neel Kashkari; and Jerome H. Powell.
President & CEO
t: (888) 399-1930
PCBB Capital Markets, a member of FINRA and SIPC, is a subsidiary of PCBB. All securities are offered through PCBB Capital Markets. Confidentiality Notice:This electronic message and any attachment may contain confidential and privileged information belonging to the sender or intended recipient. This information is intended only for the use of the persons or entities named therein. If you are not the intended recipient or the agent or employee responsible to deliver this message to the intended recipient, you are hereby notified that any disclosure, copying, use, distribution, or taking of any action in reliance on the contents of this information is strictly prohibited. If you have received this transmission in error, please immediately advise the sender by reply email and delete this message from your system. Thank you for your cooperation. The mailing address for PCBB is 1676 N. California Blvd, Suite 300 | Walnut Creek, CA 94596.