July 30, 2019

Northwest FCS News

Meeting Date:  July 30-31, 2019
 
Economic Highlights
FOMC declares the economy has changed little since their last meeting of June 2019. While labor markets remain healthy, household spending has increased slightly, and business fixed investment remains weak compared to earlier this year. Yet, they still cut rates. Inflation remains below the 2% goal. Longer-term inflation expectations are relatively stable.
  • “Information received since the Federal Open Market Committee met in June indicates that the labor market remains strong and that economic activity has been rising at a moderate rate.
  • Job gains have been solid, on average, in recent months, and the unemployment rate has remained low.
  • Growth of household spending has picked up from earlier in the year, growth of business fixed investment has been soft.
  • On a 12-month basis, overall inflation and inflation for items other than food and energy are running below 2%.
  • Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed.”
 
Policy Announcements
Fed funds rate lowered by 0.25%. New fed funds range is 2%-2.25%. The Fed remains determined to keep the expansion moving forward. But Fed admits the future has become more uncertain. Fed to end balance sheet reduction program in August instead of October – two months early!
  • “Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability.
  • In light of the implications of global developments for the economic outlook as well as muted inflation pressures, the Committee decided to lower the target range for the federal funds rate to 2% to 2.25%.
  • This action supports the Committee's view that sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2% objective are the most likely outcomes, but uncertainties about this outlook remain.
  • As the Committee contemplates the future path of the target range for the federal funds rate, it will continue to monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2% objective.”
  • The Committee will conclude the reduction of its aggregate securities holdings in the System Open Market Account in August, two months earlier than previously indicated.”
 
Forward Guidance
The Fed indicated that future rate hikes will depend on economic conditions such as labor market changes, indicators of inflation pressures and any changes in inflation expectations and international developments.
  • “In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2% inflation objective.
  • This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.”
 
Voting Results
Two dissenting votes!
Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michelle W. Bowman; Lael Brainard; James Bullard; Richard H. Clarida; Charles L. Evans; and Randal K. Quarles. Voting against the action were Esther L. George and Eric S. Rosengren, who preferred at this meeting to maintain the target range for the federal funds rate at 2.25% to 2.50%.
 
Next Meeting:  Sept. 17-18, 2019

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The preceding information contains excerpts from an official published statement on the Federal Open Market Committee’s July 30-31, 2019 meeting.  For full text, please visit the Federal Reserve website.