Econintersect: The Federal Open Market Committee (FOMC) – the board of directors of the Federal Reserve raised the federal funds rate as expected.
…. Averaging through hurricane-related fluctuations, job gains have been solid, and the unemployment rate declined further ….
Analyst Opinion of the FOMC Meeting Minutes
There were several insignificant word changes – but the only real change was the federal funds rate. Nothing suggests that the FOMC has changed its opinion on any subject. There was 2 members which did not want to raise the federal funds rate.
The Federal Funds rate was raised from 1 to 1-1/4 percent to 1-1/4 to 1‑1/2. Bloomberg / Econoday forecast was for a quarter point increase.
01 November Statement | 13 December Statement |
|---|---|
| Information received since the Federal Open Market Committee met in September indicates that the labor market has continued to strengthen and that economic activity has been rising at a solid rate despite hurricane-related disruptions. Although the hurricanes caused a drop in payroll employment in September, 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. Gasoline prices rose in the aftermath of the hurricanes, boosting overall inflation in September; however, inflation for items other than food and energy remained soft. On a 12-month basis, both inflation measures have declined this year and are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance. | Information received since the Federal Open Market Committee met in November indicates that the labor 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 and energy have declined this year and are running below 2 percent. 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 will continue to affect economic activity, employment, and inflation in the near term, but past experience suggests that the storms are unlikely to materially alter the course of the national economy over the medium term. 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 labor market conditions will strengthen somewhat further. Inflation on a 12-month basis is expected to remain somewhat below 2 percent in the near term but to stabilize around the Committee’s 2 percent objective over the medium term. Near-term risks to the economic outlook appear roughly balanced, but the Committee is monitoring inflation developments closely. | 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, and 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 labor market conditions will remain strong. Inflation on a 12‑month basis is expected to remain somewhat below 2 percent in the near term but to stabilize around the Committee’s 2 percent 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 realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 1 to 1-1/4 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 percent inflation. | In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 1-1/4 to 1‑1/2 percent. The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained 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. The Committee will carefully monitor actual and 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. | 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. The Committee will carefully monitor actual and 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. |
| The balance sheet normalization program initiated in October 2017 is proceeding. | |
| Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Patrick Harker; Robert S. Kaplan; Neel Kashkari; Jerome H. Powell; and Randal K. Quarles. | Voting for the FOMC monetary policy action were Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Patrick Harker; Robert S. Kaplan; Jerome H. Powell; and Randal K. Quarles. Voting against the action were Charles L. Evans and Neel Kashkari, who preferred at this meeting to maintain the existing target range for the federal funds rate. |
Fed Balance Sheet
December 13, 2017: FOMC Projections materials
Note: Projections of change in real gross domestic product (GDP) and projections for both measures of inflation are percent changes from the fourth quarter of the previous year to the fourth quarter of the year indicated. PCE inflation and core PCE inflation are the percentage rates of change in, respectively, the price index for personal consumption expenditures (PCE) and the price index for PCE excluding food and energy. Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated. Each participant’s projections are based on his or her assessment of appropriate monetary policy. Longer-run projections represent each participant’s assessment of the rate to which each variable would be expected to converge under appropriate monetary policy and in the absence of further shocks to the economy. The projections for the federal funds rate are the value of the midpoint of the projected appropriate target range for the federal funds rate or the projected appropriate target level for the federal funds rate at the end of the specified calendar year or over the longer run. The September projections were made in conjunction with the meeting of the Federal Open Market Committee on September 19-20, 2017. One participant did not submit longer-run projections for the change in real GDP, the unemployment rate, or the federal funds rate in conjunction with the September 19-20, 2017, meeting, and one participant did not submit such projections in conjunction with the December 12-13, 2017, meeting.
1. For each period, the median is the middle projection when the projections are arranged from lowest to highest. When the number of projections is even, the median is the average of the two middle projections. Return to table
2. The central tendency excludes the three highest and three lowest projections for each variable in each year. Return to table
3. The range for a variable in a given year includes all participants’ projections, from lowest to highest, for that variable in that year. Return to table
4. Longer-run projections for core PCE inflation are not collected. Return to table
Figure 1. Medians, central tendencies, and ranges of economic projections, 2017-20 and over the longer run
Change in real GDP
Percent
| 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | Longer run | |
|---|---|---|---|---|---|---|---|---|---|---|
| Actual | 1.3 | 2.7 | 2.7 | 2.0 | 1.8 | – | – | – | – | – |
| Upper End of Range | – | – | – | – | – | 2.6 | 2.8 | 2.4 | 2.2 | 2.2 |
| Upper End of Central Tendency | – | – | – | – | – | 2.5 | 2.6 | 2.3 | 2.0 | 1.9 |
| Median | – | – | – | – | – | 2.5 | 2.5 | 2.1 | 2.0 | 1.8 |
| Lower End of Central Tendency | – | – | – | – | – | 2.4 | 2.2 | 1.9 | 1.7 | 1.8 |
| Lower End of Range | – | – | – | – | – | 2.4 | 2.2 | 1.7 | 1.1 | 1.7 |
Unemployment rate
Percent
| 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | Longer run | |
|---|---|---|---|---|---|---|---|---|---|---|
| Actual | 7.8 | 7.0 | 5.7 | 5.0 | 4.7 | – | – | – | – | – |
| Upper End of Range | – | – | – | – | – | 4.1 | 4.0 | 4.2 | 4.5 | 5.0 |
| Upper End of Central Tendency | – | – | – | – | – | 4.1 | 4.0 | 4.0 | 4.2 | 4.7 |
| Median | – | – | – | – | – | 4.1 | 3.9 | 3.9 | 4.0 | 4.6 |
| Lower End of Central Tendency | – | – | – | – | – | 4.1 | 3.7 | 3.6 | 3.6 | 4.4 |
| Lower End of Range | – | – | – | – | – | 4.1 | 3.6 | 3.5 | 3.5 | 4.3 |
PCE inflation
Percent
| 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | Longer run | |
|---|---|---|---|---|---|---|---|---|---|---|
| Actual | 1.8 | 1.2 | 1.2 | 0.4 | 1.6 | – | – | – | – | – |
| Upper End of Range | – | – | – | – | – | 1.7 | 2.1 | 2.3 | 2.2 | 2.0 |
| Upper End of Central Tendency | – | – | – | – | – | 1.7 | 1.9 | 2.0 | 2.1 | 2.0 |
| Median | – | – | – | – | – | 1.7 | 1.9 | 2.0 | 2.0 | 2.0 |
| Lower End of Central Tendency | – | – | – | – | – | 1.6 | 1.7 | 2.0 | 2.0 | 2.0 |
| Lower End of Range | – | – | – | – | – | 1.5 | 1.7 | 1.8 | 1.9 | 2.0 |
Note: Definitions of variables and other explanations are in the notes to the projections table. The data for the actual values of the variables are annual.
Figure 2. FOMC participants’ assessments of appropriate monetary policy: Midpoint of target range or target level for the federal funds rate
Number of participants with projected midpoint of target range or target level
| Midpoint of target range or target level (Percent) | 2017 | 2018 | 2019 | 2020 | Longer run |
|---|---|---|---|---|---|
| 0.125 | |||||
| 0.250 | |||||
| 0.375 | |||||
| 0.500 | |||||
| 0.625 | |||||
| 0.750 | |||||
| 0.875 | |||||
| 1.000 | |||||
| 1.125 | 2 | 1 | |||
| 1.250 | |||||
| 1.375 | 14 | 1 | 1 | 1 | |
| 1.500 | |||||
| 1.625 | 1 | 1 | |||
| 1.750 | |||||
| 1.875 | 3 | ||||
| 2.000 | |||||
| 2.125 | 6 | ||||
| 2.250 | 1 | ||||
| 2.375 | 3 | 2 | 1 | ||
| 2.500 | 2 | ||||
| 2.625 | 1 | 4 | 2 | ||
| 2.750 | 1 | 6 | |||
| 2.875 | 3 | 1 | |||
| 3.000 | 3 | 6 | |||
| 3.125 | 1 | 5 | |||
| 3.250 | |||||
| 3.375 | 2 | ||||
| 3.500 | 1 | ||||
| 3.625 | 1 | ||||
| 3.750 | |||||
| 3.875 | |||||
| 4.000 | |||||
| 4.125 | 2 |
Note: Each shaded circle indicates the value (rounded to the nearest 1/8 percentage point) of an individual participant’s judgment of the midpoint of the appropriate target range for the federal funds rate or the appropriate target level for the federal funds rate at the end of the specified calendar year or over the longer run. One participant did not submit longer-run projections for the federal funds rate.
Source: All minutes and statement index / calendar for the Federal Reserve
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