Information received since the Federal Open Market Committee met in
September indicates that the labor market has continued to strengthen
and growth of economic activity has picked up from the modest pace seen
in the first half of this year. Although the unemployment rate is little
changed in recent months, job gains have been solid. Household spending
has been rising moderately but business fixed investment has remained
soft. Inflation has increased somewhat since earlier this year but is
still below the Committee's 2 percent longer-run objective, partly
reflecting earlier declines in energy prices and in prices of non-energy
imports. Market-based measures of inflation compensation have moved up
but remain low; most survey-based measures of longer-term inflation
expectations are little changed, on balance, in recent months.
Consistent
with its statutory mandate, the Committee seeks to foster maximum
employment and price stability. The Committee expects that, with gradual
adjustments in the stance of monetary policy, economic activity will
expand at a moderate pace and labor market conditions will strengthen
somewhat further. Inflation is expected to rise to 2 percent over the
medium term as the transitory effects of past declines in energy and
import prices dissipate and the labor market strengthens further.
Near-term risks to the economic outlook appear roughly balanced. The
Committee continues to closely monitor inflation indicators and global
economic and financial developments.
Against this backdrop, the
Committee decided to maintain the target range for the federal funds
rate at 1/4 to 1/2 percent. The Committee judges that the case for an
increase in the federal funds rate has continued to strengthen but
decided, for the time being, to wait for some further evidence of
continued progress toward its objectives. The stance of monetary policy
remains accommodative, 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; James Bullard; Stanley
Fischer; Jerome H. Powell; Eric Rosengren; and Daniel K. Tarullo. Voting
against the action were: Esther L. George and Loretta J. Mester, each
of whom preferred at this meeting to raise the target range for the
federal funds rate to 1/2 to 3/4 percent.
Implementation Note issued November 2, 2016
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