Fed Holds Rates; December Hike?
The Federal Reserve issued its latest "FOMC statement" and its "Economic Projections" yesterday. The former says, "In view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 1 to 1-1/4 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 percent inflation. 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 objectives of maximum employment and 2 percent inflation.... 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. In October, the Committee will initiate the balance sheet normalization program described in the June 2017 Addendum to the Committee's Policy Normalization Principles and Plans." The Wall Street Journal writes in "Fed to Start Paring Holdings, Keeps December Rate Rise on the Table," "The Federal Reserve indicated Wednesday it remained on track to raise short-term rates later this year and said it would begin shrinking its portfolio of bonds next month, starting to close the books on an unprecedented and sometimes controversial policy experiment. The Fed left rates unchanged and penciled in one more rate rise in 2017, signaling continued optimism about the economy even though persistently low inflation has prompted some officials to voice greater skepticism about a move this year."
