information received since the Federal Open Market Committee met in December indicates that the labor market has continued to strengthen and that economic activity has continued to expand at a moderate pace. Job gains remained solid and the unemployment rate stayed near its recent low. Household spending has continued to rise moderately while business fixed investment has remained soft. Measures of consumer
and business sentiment have improved of late. Inflation increased in
recent quarters but is still below the Committee's 2 percent longer-run
objective. Market-based measures of inflation compensation
remain low; most 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 expects 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 will rise to 2 percent over the medium term. Near-term
risks to the economic outlook appear roughly balanced. The Committee
continues to closely monitor inflation indicators and global economic
and financial developments.
In view of realized and expected labor
market conditions and inflation, the Committee decided to maintain the
target range for the federal funds rate at 1/2 to 3/4 percent. The
stance of monetary policy remains accommodative, thereby supporting some
further strengthening 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; Charles L. Evans; Stanley Fischer; Patrick
Harker; Robert S. Kaplan; Neel Kashkari; Jerome H. Powell; and Daniel K.
Tarullo.
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