Federal Open Market Committee Update
The Federal Open Market Committee left its targeted Federal Funds rate unchanged, and the stance of monetary policy remained accommodative. While acknowledging that the case for an increase has strengthened, citing the solid labor market and improving pace of economic activity, the committee nonetheless decided to wait for further evidence of continued economic expansion. The statement also noted that business investment remains soft and inflation is still below target. However, 3 members did vote for a rate increase, the largest number since the initial tightening last year. The language is being viewed as a signal that a rate hike in 2016 is still very much on the table.
Rates and Market:
- Federal Funds Target: ¼ to ½ percent
- Policy Bias: Remains accommodative
- Market Reaction: Bond yields initially jumped slightly only to retrace 1-2bp below pre-announcement levels.
The FOMC announced the following actions and analysis:
- 7 to 3 vote
- Economic activity accelerating from sluggish pace earlier in the year
- Labor and consumer spending is strong, business investment is still weak
- Inflation is soft and expected to remain so
- The case for tightening has strengthened, but more evidence is required
The Statement:
Information received since the Federal Open Market Committee met in July indicates that the labor market has […]