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Wednesday, July 27, 2016

FOMC: Economic Risks have Diminished

The Federal Open Market Committee (FOMC) once again decided to maintain the current target for the federal funds rate at 25-50 basis points in July.

“Near term risks to the economic outlook have diminished,” said the FOMC in a post-meeting statement. This was likely a reference to both financial market uncertainty following Brexit and labor market uncertainty following an anemic jobs report in May.

In their statement, the Committee noted that economic activity was expanding at a moderate pace. Household spending had grown strongly and the labor market had also strengthened since the June meeting. In contrast, inflation continued to run below the Committee’s 2 percent objective, partly reflecting low energy prices along with prices of non-energy imports, and business fixed investment was viewed as “soft.”

Against this backdrop, all but one member voted to maintain accommodative policy at this meeting. Kansas City Federal Reserve President Esther George voted against the action, citing a preference for a 25 basis point increase.

Read the FOMC statement.
Visit Banks and the Economy.

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