In case you haven't already heard, the Fed left rates unchanged at the August meeting. Strength in the labor market and spending (consumer and business) were once again highlighted in the committee’s assessment of the economy, while inflation is trending in line with the stated 2% objective. At the margin, the language would seem to indicate the Fed believes the economy has accelerated slightly since their last announcement!

Rates and Market:

  • Fed Funds Target: 1.75% - 2.00%
  • Policy Bias: remains accommodative
  • Market Reaction: yields dropped about 1bp immediately following the announcement

The FOMC announced the following actions and analysis:

  • 8 – 0 vote
  • Economic activity is rising at a strong rate 
  • Inflation remains near 2%
  • Risks to economic outlook appear roughly balanced

The Statement:
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 at a strong rate. Job gains have been strong, on average, in recent months, and the unemployment rate has stayed low. Household spending and business fixed investment have grown strongly. On a 12-month basis, both overall inflation and inflation for items other than food and energy remain near 2 percent. Indicators 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 expects that further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective over the medium term. Risks to the economic outlook appear roughly balanced.

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 1-3/4 to 2 percent. The stance of monetary policy remains accommodating, thereby supporting strong 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 maximum employment objective and its symmetric 2 percent inflation objective. 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.

Voting for the FOMC monetary policy action were: Jerome H. Powell, Chairman; John C. Williams, Vice Chairman; Thomas I. Barkin; Raphael W. Bostic; Lael Brainard; Esther L. George; Loretta J. Mester; and Randal K. Quarles.

This information is brought to you by: Steve Brown President & CEO, PCBB & Christy Sorenson VP Northern Real Estate Sales Manager, Senior Real Estate Loan Officer, Bank of the Pacific