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 moderately so far this year. Job gains have been solid, on average, since the beginning of the year, and the unemployment rate has declined. Household spending and business fixed investment have continued to expand. On a 12-month basis, overall inflation and the measure excluding food and energy prices have declined 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. 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.
Nearterm 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 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.
For the time being, 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. The Committee expects to begin implementing its balance sheet
normalization program relatively soon, provided that the economy evolves broadly as
anticipated; this program is described in the June 2017 Addendum to the Committee’s
Policy Normalization Principles and Plans.
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; and Jerome H. Powell.
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For release at 2 p.m. EDT July 26, 2017
Decisions Regarding Monetary Policy Implementation
The Federal Reserve has made the following decisions to implement the monetary policy stance announced by the Federal Open Market Committee in its statement on July 26, 2017:
• The Board of Governors of the Federal Reserve System voted unanimously to maintain the interest rate paid on required and excess reserve balances at 1.25 percent.
• As part of its policy decision, the Federal Open Market Committee voted to authorize and direct the Open Market Desk at the Federal Reserve Bank of New York, until instructed otherwise, to execute transactions in the System Open Market Account in accordance with the following domestic policy directive:
“Effective July 27, 2017, the Federal Open Market Committee directs the Desk to
undertake open market operations as necessary to maintain the federal funds rate
in a target range of 1 to 1-1/4 percent, including overnight reverse repurchase
operations (and reverse repurchase operations with maturities of more than one
day when necessary to accommodate weekend, holiday, or similar trading
conventions) at an offering rate of 1.00 percent, in amounts limited only by the
value of Treasury securities held outright in the System Open Market Account
that are available for such operations and by a per-counterparty limit of
$30 billion per day.
The Committee directs the Desk to continue rolling over maturing Treasury
securities at auction and to continue reinvesting principal payments on all agency
debt and agency mortgage-backed securities in agency mortgage-backed
securities. The Committee also directs the Desk to engage in dollar roll and
coupon swap transactions as necessary to facilitate settlement of the Federal
Reserve’s agency mortgage-backed securities transactions.”
More information regarding open market operations may be found on the Federal
Reserve Bank of New York’s website.
• In a related action, the Board of Governors of the Federal Reserve System voted
unanimously to approve the establishment of the primary credit rate at the existing level of 1.75 percent.
This information will be updated as appropriate to reflect decisions of the Federal Open Market Committee or the Board of Governors regarding details of the Federal Reserve’s operational tools and approach used to implement monetary policy.
