Experiential Wealth

FOMC June 2017 Press Release Language Changes

Jun 14, 2017 | FOMC, Individuals, Institutions


  • Economic activity expanded moderately (slight positive)
  • Labor market continues to strengthen (no change)
  • Household spending continues to rise moderately (positive)
  • Business fixed investment firmed (no change)
  • Inflation has declined (negative change)
  • Near term risks to the economic outlook appear balanced (no change)
  • All but 1 member voted to raising rates by 25bp (change)
  • Bottom Line:  although inflation has declined recently and running somewhat below 2%, there seems to be no serious concern – raise rates by 25bp (change) and expect to begin decreasing reinvestment of principal payments from the Federal Reserve’s securities holdings sometime this year (change)
  • Projections: according to the companion economic projections[1] released, federal funds rate are projected to be at 1.4% by year end (i.e. 1 more rate hike this year), 2.1% by year-end 2018 (i.e. 3 rate hikes next year) and 2.9% (change lower) by the year-end 2019 (i.e. 3 to 4 more rate hikes).

Release Date: June 14, 2017

For release at 2:00 p.m. EDT

Information received since the Federal Open Market Committee met in March May indicates that the labor market has continued to strengthen even as growth in and that economic activity slowed. has been rising moderately so far this year. Job gains were have moderated but have been solid, on average, in recent months since the beginning of the year, and the unemployment rate has declined. Household spending rose only modestly, but the fundamentals underpinning the continued growth of consumption remained solid. Business has picked up in recent months and business fixed investment firmed. has continued to expand. Inflation measured on On a 12-month basis recently has been running close to the Committee’s 2 percent longer-run objective. Excluding energy and food, consumer prices declined in March and inflation continued to run has declined recently and, like the measure excluding food and energy prices, is running somewhat 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 views the slowing in growth during the first quarter as likely to be transitory and continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, labor market conditions will strengthen somewhat further, and inflation willInflation on a 12-month basis is expected to remain somewhat below 2 percent in the near term but to stabilize around 2 percent objective over the medium term. Near-term risks to the economic outlook appear roughly balanced. The but the Committee continues to closely monitor inflation indicators and global economic and financial is monitoring inflation developments closely.

In view of realized and expected labor market conditions and inflation, the Committee decided to maintain raise the target range for the federal funds rate at 3/4 1 to 1 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.

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. The Committee currently expects to begin implementing a balance sheet normalization program this year, provided that the economy evolves broadly as anticipated.  This program, which would gradually reduce the Federal Reserve’s securities holdings by decreasing reinvestment of principal payments from those securities, is described in the accompanying 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.

Voting against the action was Neel Kashkari, who preferred at this meeting to maintain the existing target range for the federal funds rate.

Source: The Federal Reserve https://www.federalreserve.gov/newsevents/pressreleases/monetary20170614a.htm

[1] https://www.federalreserve.gov/monetarypolicy/fomcprojtabl20170315.htm