FOMC Leaves Interest Rate Unchanged, Upgrades GDP and Personal Consumption Assessments

August 1, 2018

Today’s statement sets the stage for a likely eighth interest rate hike at the next FOMC meeting in September.

  • Assessments of overall growth and the key consumption component of demand were each upgraded to “strong.”
  • Policy continues to be characterized as accommodative and thereby supportive of “strong labor market conditions and a sustained return to 2 percent inflation.”
  • The point is made that total and core inflation are now near 2%.
  • The decision, like earlier ones, was made unanimously. As in June, eight voting members of the FOMC participated, seven being the same as before. Because former San Francisco Fed President Williams, who had been a rotating voting Fed President for year 2018, now is a permanent FOMC voter in his new position as New York Fed President (replacing Dudley), there was a need to replace Williams’ departure from the list of four rotating presidents. That spot was taken by KC Fed President George. She will also be among the 2019 voting members and is generally more hawkish on interest rates than the FOMC median view.
  • There is no language in the statement to suggest a pause in normalization, such as a phrase perhaps about the uncertain impact of trade protectionism that might dampen growth. Meanwhile, rhetorical comments by a variety of Fed officials since the June meeting have seemed more consistent with two than one more rate hikes before end-2018.

Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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