Press Release
Release Date: July 27, 2016
For release at 2:00 p.m. EDT
Information received since the Federal Open Market Committee
met in June indicates that the labor market strengthened and that economic
activity has been expanding at a moderate rate. Job gains were strong in June
following weak growth in May. On balance, payrolls and other labor market
indicators point to some increase in labor utilization in recent months.
Household spending has been growing strongly but business fixed investment has
been soft. Inflation has continued to run 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 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 currently
expects that, with gradual adjustments in the stance of monetary policy,
economic activity will expand at a moderate pace and labor market indicators
will strengthen. Inflation is expected to remain low in the near term, in part
because of earlier declines in energy prices, but 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 have diminished. 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 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; Loretta J. Mester; Jerome H. Powell; Eric Rosengren; and
Daniel K. Tarullo. Voting against the action was Esther L. George, who
preferred at this meeting to raise the target range for the federal funds rate
to 1/2 to 3/4 percent.
Implementation Note issued July 27, 2016
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