May 02, 2018
Federal Reserve issues FOMC statement
For immediate release
Information received since the Federal Open Market Committee met in March indicates that the labor market has continued to strengthen and that economic activity has been rising at a moderate rate. Job gains have been strong, on average, in recent months, and the unemployment rate has stayed low. Recent data suggest that growth of household spending moderated from its strong fourth-quarter pace, while business fixed investment continued to grow strongly. On a 12-month basis, both overall inflation and inflation for items other than food and energy have moved close to 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.
As always – first paragraph is the “report card” paragraph. Uncle Sammy is showing improvement in class. Sammy gets a B+ for job growth and unemployment, a B- for household spending (money average Joe’s and Josephine’s like you and I spend), an A- for business spending, and a C+ for recess (there was that “gum in the hair incident…). Inflation (price increases) is moving closer to a 2% number – which is the Fed’s target. The Fed doesn’t seem to worried because compensation inflation (wage growth) isn’t out of control. Wage inflation is often the scariest kind – because, while it’s easy to cut the price of a sweater or a lawn mower – it’s almost impossible to reduce people’s wages, so once wage inflation takes hold it is hard to control.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with further gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace in the medium term and labor market conditions will remain strong. Inflation on a 12-month basis is expected to run near the Committee's symmetric 2 percent objective over the medium term. Risks to the economic outlook appear roughly balanced.
Here's where the Fed gives us their “why.” The Fed exists to balance job growth and stable prices. The Fed thinks the economy will keep growing “moderately” and they think inflation is under control. Way to go Fed!
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 1-1/2 to 1-3/4 percent. The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation.
This is the “money paragraph.” The Fed kept short term rates (the Federal Funds Rate) the same. They think rates are low enough (“accommodative”) that they are still pushing the economy along. In other words, the Fed is saying their foot is still on the accelerator – not the brake.
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 further 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.
Since the Fed just told us what time it is – this is the paragraph where they tell us how the watch is made. Bottom line: they look at lots of stuff, “carefully” monitor it, and cross their fingers really hard.
Voting for the FOMC monetary policy action were Jerome H. Powell, Chairman; William C. Dudley, Vice Chairman; Thomas I. Barkin; Raphael W. Bostic; Lael Brainard; Loretta J. Mester; Randal K. Quarles; and John C. Williams.
All the nerds agreed! Nobody had to be voted off the island.