The US Federal Reserve’s open market committee has lifted its funds rate, raising the target range overnight to 1.25-1.5%, up a quarter percent from the level set in June.
The vote was 7-2. Fed chair Janet Yellen and her replacement in that role from February, Jerome Powell, both supported the raise.
As for followup, the release was typically vague.
Information received since the Federal open market committee met in November indicates that the labour market has continued to strengthen and that economic activity has been rising at a solid rate. Averaging through hurricane-related fluctuations, job gains have been solid and the unemployment rate declined further. Household spending has been expanding at a moderate rate and growth in business fixed investment has picked up in recent quarters.
On a 12-month basis, both overall inflation and inflation for items other than food & energy have declined this year and are running below 2%. 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. Hurricane-related disruptions and rebuilding have affected economic activity, employment & inflation in recent months but have not materially altered the outlook for the national economy. Consequently, the committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labour market conditions will remain strong.
Inflation on a 12‑month basis is expected to remain somewhat below 2% in the near term but to stabilise around the committee’s 2% 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 realised & expected labour market conditions & inflation, the committee decided to raise the target range for the federal funds rate to 1.25-1.5%. The stance of monetary policy remains accommodative, thereby supporting strong labour market conditions and a sustained return to 2% inflation.
In determining the timing & size of future adjustments to the target range for the federal funds rate, the committee will assess realised & expected economic conditions relative to its objectives of maximum employment & 2% inflation. This assessment will take into account a wide range of information, including measures of labour market conditions, indicators of inflation pressures & inflation expectations, and readings on financial & international developments. The committee will carefully monitor actual & 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.
15 June 2017: Fed lifts rate again
Attribution: Fed release.