The FOMC did not offer additional forward guidance as to when rates will rise. The press release noted that, “The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.” The FOMC said rates are likely to remain low due to underemployment, but they are beginning to see pressure from inflation. Inflation rose in the second quarter, the Committee commented that, “the likelihood of inflation running persistently below 2 percent has diminished somewhat.”
The Committee noted that economic progress is improving, particularly the labor market. Despite a declining unemployment rate, “there remains significant underutilization of labor resources.” Moreover, the FOMC found that the housing market recovery is sluggish and inflation is moving towards the Committee’s longer-tern goals.
The market reacted positively to the release, gaining 47 basis points in the 30 minutes immediately following the release.
Read the full FOMC statement below. Read the Federal Reserve release.