FOMC Statement and Forecasts

December 13, 2017

The FOMC met market expectations in raising the federal funds rate by an as-expected 25 basis points to 1.25-1.50%. But the vote was 7-2, with Chicago Fed President Evans joining Minneapolis Fed President Kashkari in favoring no change in the rate. A fairly upbeat statement observes that unemployment (now 4.1%) has declined further and that growth in jobs and overall GDP have been solid. The policy stance is still considered accommodative, and forward guidance stipulates that

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.

Inflation is still running below the 2.0% target, and both market-based compensation for inflation and survey-based measures of expected inflation are low and little changed.

Released updated growth and inflation projections, which the FOMC does quarterly, revised projected GDP growth upward by 0.4 percentage points to 2.5%, presumably to account for fiscal tax cuts, but leave inflation forecasts of 1.9% next year and 2.0% in both 2019 and 2020 unchanged.

Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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