FRB Press Release - December 16, 2015
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Information received since the Federal Open Market Committee met in
October suggests that economic activity has been expanding at a moderate
pace. Household spending and business fixed investment have been
increasing at solid rates in recent months, and the housing sector has
improved further; however, net exports have been soft. A range of recent
labor market indicators, including ongoing job gains and declining
unemployment, shows further improvement and confirms that
underutilization of labor resources has diminished appreciably since
early this year. Inflation has continued to run below the Committee's 2
percent longer-run objective, partly reflecting declines in energy
prices and in prices of non-energy imports. Market-based measures of
inflation compensation remain low; some survey-based measures of
longer-term inflation expectations have edged down.
Consistent with its statutory mandate, the Committee seeks to
foster maximum employment and price stability. The Committee currently
expects that, with gradual adjustments in the stance of monetary policy,
economic activity will continue to expand at a moderate pace and labor
market indicators will continue to strengthen. Overall, taking into
account domestic and international developments, the Committee sees the
risks to the outlook for both economic activity and the labor market as
balanced. Inflation is expected to rise to 2 percent over the medium
term as the transitory effects of declines in energy and import prices
dissipate and the labor market strengthens further. The Committee
continues to monitor inflation developments closely.
The Committee judges that there has been considerable improvement in
labor market conditions this year, and it is reasonably confident that
inflation will rise, over the medium term, to its 2 percent objective.
Given the economic outlook, and recognizing the time it takes for policy
actions to affect future economic outcomes, the Committee decided to
raise the target range for the federal funds rate to 0.25 to 0.50 percent.
The stance of monetary policy remains accommodative after this
increase, thereby supporting further improvement in labor market
conditions and a 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.
In light of the current shortfall of inflation from 2 percent, 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.
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, and it anticipates
doing so until normalization of the level of the federal funds rate is
well under way. This policy, by keeping the Committee's holdings of
longer-term securities at sizable levels, should help maintain
accommodative financial conditions.
Voting for the FOMC monetary policy action were: Janet L. Yellen,
Chair; William C. Dudley, Vice Chairman; Lael Brainard; Charles L.
Evans; Stanley Fischer; Jeffrey M. Lacker; Dennis P. Lockhart; Jerome H.
Powell; Daniel K. Tarullo; and John C. Williams.
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Wednesday, December 16, 2015
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