Expected December 2015 Federal Open Market Committee (FOMC) Statement

By Chandrashekar (Chandra) Tamirisa, (On Twitter) @c_tamirisa

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Information received since the Federal Open Market Committee met in October suggests that the US economy is growing at a moderate pace. The unemployment rate has declined to a level indicating an economy at full employment and while wages are rising, they need to continue to rise to support consumer spending and savings. The Committee anticipates that inflation over the medium term likely will run at or below its 2 percent objective. Longer-term inflation expectations have remained stable.

It is the Committee’s assessment that the US economy has recovered robustly and is performing strongly after the Great Recession. The effect of net exports on the US economy relative to other components of the GDP is small. US economic growth, as a result, is not affected significantly negatively by slowing growth abroad even though there is an inflation pass-through in terms of a downward pressure on inflation. Low inflation, because of low energy costs and low import prices due to the stronger dollar, is expected to be transitory. Inflation will rise as the rest of the global economy recovers.

For continued progress toward a self-sustaining steady state growth rate in the context of maximum employment and price stability, the Committee decided to embark on the path of gradually raising the federal funds rate. Beginning December 2015, and at every other meeting following that, the federal funds rate will be raised by 25 basis points through December 2018 at which time the Committee will, based on the economic conditions, pause to consider continuation of raising the federal funds rate or lowering the rate or ending raising the rate.

The Committee will also consider information such as additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments consistent with its dual mandate of maximum employment and price stability during the period of raising the federal funds rate from December 2015 through December 2018 to adjust the stance of monetary policy if and as necessary.

The Committee has ended 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. To ensure that the money supply is put to its most productive uses, the Committee has stopped paying interest on excess reserves.

Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Stanley Fischer; Jeffrey M. Lacker; Dennis P. Lockhart; Jerome H. Powell; Daniel K. Tarullo; and John C. Williams. Voting against were none.

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About Chandrashekar (Chandra) Tamirisa

http://www.thecommonera.com/Common_Era/Me.html
This entry was posted in Economics, Monetary Policy, Transformations LLC and tagged . Bookmark the permalink.

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