Econintersect: The Federal Open Market Committee (FOMC) – the board of directors of the Federal Reserve increased the federal funds rate as expected, and stated:
…. Household spending and business fixed investment have grown strongly ….
Overall the Fed appears to believe the economy has strengthened since the last meeting.
Analyst Opinion of the FOMC Meeting Minutes
There was one significant word change – the deletion of the following phrase: “The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation.”
The FOMC members economic projections are at the end of this post.
The Federal Funds rate was raised from 1-3/4 to 2 percent to 2 to 2-1/4 percent. Econoday consensus forecast was for a quarter point increase.
01 August Statement | 26 September Statement |
|---|---|
| Information received since the Federal Open Market Committee met in June indicates that the labor market has continued to strengthen and that economic activity has been rising at a strong rate. Job gains have been strong, on average, in recent months, and the unemployment rate has stayed low. Household spending and business fixed investment have grown strongly. On a 12-month basis, both overall inflation and inflation for items other than food and energy remain near 2 percent. Indicators of longer-term inflation expectations are little changed, on balance. | Information received since the Federal Open Market Committee met in August indicates that the labor market has continued to strengthen and that economic activity has been rising at a strong rate. Job gains have been strong, on average, in recent months, and the unemployment rate has stayed low. Household spending and business fixed investment have grown strongly. On a 12-month basis, both overall inflation and inflation for items other than food and energy remain near 2 percent. Indicators 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 further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective over the medium term. Risks to the economic outlook appear roughly balanced. | Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective over the medium term. Risks to the economic outlook appear roughly balanced. |
| 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 1-3/4 to 2 percent. The stance of monetary policy remains accommodative, thereby supporting strong 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 2 to 2-1/4 percent. |
| 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 maximum employment objective and its symmetric 2 percent inflation objective. 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 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 maximum employment objective and its symmetric 2 percent inflation objective. 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. |
| Voting for the FOMC monetary policy action were: Jerome H. Powell, Chairman; John C. Williams, Vice Chairman; Thomas I. Barkin; Raphael W. Bostic; Lael Brainard; Esther L. George; Loretta J. Mester; and Randal K. Quarles. | Voting for the FOMC monetary policy action were: Jerome H. Powell, Chairman; John C. Williams, Vice Chairman; Thomas I. Barkin; Raphael W. Bostic; Lael Brainard; Richard H. Clarida; Esther L. George; Loretta J. Mester; and Randal K. Quarles. |
Fed Balance Sheet
FOMC Projections material
Economic projections of Federal Reserve Board members and Federal Reserve Bank presidents under their individual assessments of projected appropriate monetary policy, September 2018
Advance release of table 1 of the Summary of Economic Projections to be released with the FOMC minutes
Percent
Variable | Median1 | Central tendency2 | Range3 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2018 | 2019 | 2020 | 2021 | Longer run | 2018 | 2019 | 2020 | 2021 | Longer run | 2018 | 2019 | 2020 | 2021 | Longer run | |
Change in real GDP | 3.1 | 2.5 | 2.0 | 1.8 | 1.8 | 3.0 – 3.2 | 2.4 – 2.7 | 1.8 – 2.1 | 1.6 – 2.0 | 1.8 – 2.0 | 2.9 – 3.2 | 2.1 – 2.8 | 1.7 – 2.4 | 1.5 – 2.1 | 1.7 – 2.1 |
June projection | 2.8 | 2.4 | 2.0 | n.a. | 1.8 | 2.7 – 3.0 | 2.2 – 2.6 | 1.8 – 2.0 | n.a. | 1.8 – 2.0 | 2.5 – 3.0 | 2.1 – 2.7 | 1.5 – 2.2 | n.a. | 1.7 – 2.1 |
Unemployment rate | 3.7 | 3.5 | 3.5 | 3.7 | 4.5 | 3.7 | 3.4 – 3.6 | 3.4 – 3.8 | 3.5 – 4.0 | 4.3 – 4.6 | 3.7 – 3.8 | 3.4 – 3.8 | 3.3 – 4.0 | 3.4 – 4.2 | 4.0 – 4.6 |
June projection | 3.6 | 3.5 | 3.5 | n.a. | 4.5 | 3.6 – 3.7 | 3.4 – 3.5 | 3.4 – 3.7 | n.a. | 4.3 – 4.6 | 3.5 – 3.8 | 3.3 – 3.8 | 3.3 – 4.0 | n.a. | 4.1 – 4.7 |
PCE inflation | 2.1 | 2.0 | 2.1 | 2.1 | 2.0 | 2.0 – 2.1 | 2.0 – 2.1 | 2.1 – 2.2 | 2.0 – 2.2 | 2.0 | 1.9 – 2.2 | 2.0 – 2.3 | 2.0 – 2.2 | 2.0 – 2.3 | 2.0 |
June projection | 2.1 | 2.1 | 2.1 | n.a. | 2.0 | 2.0 – 2.1 | 2.0 – 2.2 | 2.1 – 2.2 | n.a. | 2.0 | 2.0 – 2.2 | 1.9 – 2.3 | 2.0 – 2.3 | n.a. | 2.0 |
Core PCE inflation4 | 2.0 | 2.1 | 2.1 | 2.1 | 1.9 – 2.0 | 2.0 – 2.1 | 2.1 – 2.2 | 2.0 – 2.2 | 1.9 – 2.0 | 2.0 – 2.3 | 2.0 – 2.2 | 2.0 – 2.3 | |||
June projection | 2.0 | 2.1 | 2.1 | n.a. | 1.9 – 2.0 | 2.0 – 2.2 | 2.1 – 2.2 | n.a. | 1.9 – 2.1 | 2.0 – 2.3 | 2.0 – 2.3 | n.a. | |||
Memo: Projected appropriate policy path | |||||||||||||||
Federal funds rate | 2.4 | 3.1 | 3.4 | 3.4 | 3.0 | 2.1 – 2.4 | 2.9 – 3.4 | 3.1 – 3.6 | 2.9 – 3.6 | 2.8 – 3.0 | 2.1 – 2.4 | 2.1 – 3.6 | 2.1 – 3.9 | 2.1 – 4.1 | 2.5 – 3.5 |
June projection | 2.4 | 3.1 | 3.4 | n.a. | 2.9 | 2.1 – 2.4 | 2.9 – 3.4 | 3.1 – 3.6 | n.a. | 2.8 – 3.0 | 1.9 – 2.6 | 1.9 – 3.6 | 1.9 – 4.1 | n.a. | 2.3 – 3.5 |
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 June projections were made in conjunction with the meeting of the Federal Open Market Committee on June 12-13, 2018. 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 June 12-13, 2018, meeting, and one participant did not submit such projections in conjunction with the September 25-26, 2018, 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, 2018-21 and over the longer run
Change in real GDP
Percent
| 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | Longer Run | |
|---|---|---|---|---|---|---|---|---|---|---|
| Actual | 2.6 | 2.7 | 2.0 | 1.9 | 2.5 | – | – | – | – | – |
| Upper End of Range | – | – | – | – | – | 3.2 | 2.8 | 2.4 | 2.1 | 2.1 |
| Upper End of Central Tendency | – | – | – | – | – | 3.2 | 2.7 | 2.1 | 2.0 | 2.0 |
| Median | – | – | – | – | – | 3.1 | 2.5 | 2.0 | 1.8 | 1.8 |
| Lower End of Central Tendency | – | – | – | – | – | 3.0 | 2.4 | 1.8 | 1.6 | 1.8 |
| Lower end of Range | – | – | – | – | – | 2.9 | 2.1 | 1.7 | 1.5 | 1.7 |
Unemployment rate
Percent
| 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | Longer Run | |
|---|---|---|---|---|---|---|---|---|---|---|
| Actual | 7.0 | 5.7 | 5.0 | 4.7 | 4.1 | – | – | – | – | – |
| Upper End of Range | – | – | – | – | – | 3.8 | 3.8 | 4.0 | 4.2 | 4.6 |
| Upper End of Central Tendency | – | – | – | – | – | 3.7 | 3.6 | 3.8 | 4.0 | 4.6 |
| Median | – | – | – | – | – | 3.7 | 3.5 | 3.5 | 3.7 | 4.5 |
| Lower End of Central Tendency | – | – | – | – | – | 3.7 | 3.4 | 3.4 | 3.5 | 4.3 |
| Lower end of Range | – | – | – | – | – | 3.7 | 3.4 | 3.3 | 3.4 | 4.0 |
PCE inflation
Percent
| 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | Longer Run | |
|---|---|---|---|---|---|---|---|---|---|---|
| Actual | 1.2 | 1.2 | 0.3 | 1.6 | 1.8 | – | – | – | – | – |
| Upper End of Range | – | – | – | – | – | 2.2 | 2.3 | 2.2 | 2.3 | 2.0 |
| Upper End of Central Tendency | – | – | – | – | – | 2.1 | 2.1 | 2.2 | 2.2 | 2.0 |
| Median | – | – | – | – | – | 2.1 | 2.0 | 2.1 | 2.1 | 2.0 |
| Lower End of Central Tendency | – | – | – | – | – | 2.0 | 2.0 | 2.1 | 2.0 | 2.0 |
| Lower end of Range | – | – | – | – | – | 1.9 | 2.0 | 2.0 | 2.0 | 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) | 2018 | 2019 | 2020 | 2021 | Longer Run |
|---|---|---|---|---|---|
| 4.500 | |||||
| 4.375 | |||||
| 4.250 | |||||
| 4.125 | 1 | ||||
| 4.000 | |||||
| 3.875 | 1 | 1 | |||
| 3.750 | |||||
| 3.625 | 1 | 6 | 2 | ||
| 3.500 | 1 | 1 | |||
| 3.375 | 4 | 2 | 4 | ||
| 3.250 | 1 | ||||
| 3.125 | 4 | 4 | 1 | ||
| 3.000 | 1 | 6 | |||
| 2.875 | 4 | 1 | 3 | ||
| 2.750 | 4 | ||||
| 2.625 | 1 | 1 | 1 | ||
| 2.500 | 3 | ||||
| 2.375 | 12 | 1 | |||
| 2.250 | |||||
| 2.125 | 4 | 1 | 1 | 1 |
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.
Explanation of Economic Projections Charts
The charts show actual values and projections for three economic variables, based on FOMC participants’ individual assessments of appropriate monetary policy:
- Change in Real Gross Domestic Product (GDP)-as measured from the fourth quarter of the previous year to the fourth quarter of the year indicated.
- Unemployment Rate–the average civilian unemployment rate in the fourth quarter of each year.
- PCE Inflation-as measured by the change in the personal consumption expenditures (PCE) price index from the fourth quarter of the previous year to the fourth quarter of the year indicated.
Information for these variables is shown for each year from 2013 to 2021, and for the longer run.
The solid blue line, labeled “Actual,” shows the historical values for each variable.
The solid red lines depict the median projection in each period for each variable. The median value in each period 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.
The range and central tendency for each variable in each projection period are depicted in “box and whiskers” format. The blue connected horizontal and vertical lines (“whiskers”) represent the range of the projections of policymakers. The bottom of the range for each variable is the lowest of all of the projections for that year or period. Likewise, the top of the range is the highest of all of the projections for that year or period. The light blue shaded boxes represent the central tendency, which is a narrower version of the range that excludes the three highest and three lowest projections for each variable in each year or period.
The longer-run projections, which are shown on the far right side of the charts, are the rates of growth, unemployment, and inflation to which a policymaker expects the economy to converge over time–maybe in five or six years–in the absence of further shocks and under appropriate monetary policy. Because appropriate monetary policy, by definition, is aimed at achieving the Federal Reserve’s dual mandate of maximum employment and price stability in the longer run, policymakers’ longer-run projections for economic growth and unemployment may be interpreted, respectively, as estimates of the economy’s normal or trend rate of growth and its normal unemployment rate over the longer run. The longer-run projection shown for inflation is the rate of inflation judged to be most consistent with the Federal Reserve’s dual mandate.
Explanation of Policy Path Chart
This chart is based on policymakers’ assessments of appropriate monetary policy, which, by definition, is the future path of policy that each participant deems most likely to foster outcomes for economic activity and inflation that best satisfy his or her interpretation of the Federal Reserve’s dual objectives of maximum employment and stable prices.
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.
Source: All minutes and statement index / calendar for the Federal Reserve
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