FOMC Statement and Forecasts

September 26, 2018

The Federal Open Market Committee as expected raised its federal funds target by a quarter percentage point to a range of 2.00 – 2.25%. The released statement

  • Repeated the same first paragraph used after the August 1 statement, which deals with economic conditions.
  • Made no changes to the second paragraph that projects how its mandate objectives are progressing, and retained the view that risks to the outlook are roughly balanced.
  • Paragraph 3 deleted the characterization that policy even after the latest interest rate hike remains accommodative.
  • Paragraph 4, which enumerates factors that will affect the timing and size of future interest rate changes was not modified, either.
  • The final paragraph reveals that the vote to raise the key interest rate was made unanimously.

The updated projections also failed to surprise. Growth this year was bumped upward by 0.3 percentage points to 3.1%, and that for 2019 was raised to 2.5% from 2.4% predicted back in June. Projected growth in 2020 remains 2.0%, and the first crack at predicting 2021 shows 1.8%, matching the view of long-term trend. An unemployment rate of 3.7% in 2018 and 2021 flanks 3.5% in the two middle years, all years show unemployment well below the 4.5% longer-term estimate. PCE inflation next year was bumped down to 2.0% but then rises back to 2.1% in 2020 and 2021. Core PCE inflation is projected steady at 2.1% in 2019-21. The median appropriate fed funds rate path suggests 1 more rate hike this year, three hikes in 2019, and one final move in 2020, which will put the level somewhat into restrictive mode.

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



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