Release date: March 16, 2016
Information received since the Federal Open Market Committee met in January shows that economic activity has been expanding in a moderate pace despite the global economic and financial developments of latest months. Household spending has been increasing at a moderate rate, and also the housing sector has improved further; however, business fixed investment and net exports have been soft. A variety of recent indicators, including strong job gains, suggests additional strengthening from the labor market. Inflation acquired in recent months; however, it continued to operate below the Committee’s 2 percent longer-run objective, partly reflecting declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance, recently.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee currently expects that, with gradual adjustments within the stance of monetary policy, economic activity will expand at a moderate pace and labor market indicators continues to bolster. However, global economic and financial developments still pose risks. Inflation is anticipated to remain lower in the near term, partly because of earlier declines in energy prices, but to increase to 2 per cent within the medium term as the transitory results of declines in energy and import prices dissipate and the labor market strengthens further. The Committee is constantly on the monitor inflation developments closely.
Against this backdrop, the Committee decided to keep up with the target range for that federal funds rate at 1/4 to 1/2 per cent. The stance of economic policy remains accommodative, thereby supporting further improvement in labor market conditions along with a go back to 2 percent inflation.
In determining the timing and size future adjustments to the prospective range for that federal funds rate, the Committee will assess realized and expected economic conditions in accordance with its objectives of maximum employment and 2 percent inflation. This assessment will require into account an array of information, including measures at work market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. Considering the present 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 fashion that will warrant only gradual increases within the federal funds rate; the federal funds rate is prone to remain, for a while, below levels which are likely to prevail within the longer run. However, the particular road to the government funds rate is determined by the economical 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 from the degree of the federal funds rate is well under way. This insurance policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.
Voting for that 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 from the action was Esther L. George, who preferred only at that meeting to boost the prospective range for that federal funds rate to 1/2 to 3/4 per cent.
