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Information received since the Federal Open Market Committee met in July
suggests that economic activity is expanding at a moderate pace. Household
spending and business fixed investment have been increasing moderately, and
the housing sector has improved further; however, net exports have been
soft. The labor market continued to improve, with solid job gains and
declining unemployment. On balance, labor market indicators show that
underutilization of labor resources has diminished since early this year.
Inflation has continued to run below the Committee's longer-run objective,
partly reflecting declines in energy prices and in prices of non-energy
imports. Market-based measures of inflation compensation moved lower;
survey-based measures of longer-term inflation expectations have remained
stable.
Consistent with its statutory mandate, the Committee seeks to foster
maximum employment and price stability. Recent global economic and financial
developments may restrain economic activity somewhat and are likely to put
further downward pressure on inflation in the near term. Nonetheless, the
Committee expects that, with appropriate policy accommodation, economic
activity will expand at a moderate pace, with labor market indicators
continuing to move toward levels the Committee judges consistent with its
dual mandate. The Committee continues to see the risks to the outlook for
economic activity and the labor market as nearly balanced but is monitoring
developments abroad. Inflation is anticipated to remain near its recent low
level in the near term but the Committee expects inflation to rise gradually
toward 2 percent over the medium term as the labor market improves further
and the transitory effects of declines in energy and import prices
dissipate. The Committee continues to monitor inflation developments
closely.
To support continued progress toward maximum employment and price
stability, the Committee today reaffirmed its view that the current 0 to 1/4
percent target range for the federal funds rate remains appropriate. In
determining how long to maintain this target range, the Committee will
assess progress--both realized and expected--toward its objectives of
maximum employment and 2 percent inflation. 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. The Committee
anticipates that it will be appropriate to raise the target range for the
federal funds rate when it has seen some further improvement in the labor
market and is reasonably confident that inflation will move back to its 2
percent objective over the medium term.
The Committee is maintaining its existing policy of reinvesting principal
payments from its holdings of agency debt and agency mortgage-backed
securities in agency mortgage-backed securities and of rolling over maturing
Treasury securities at auction. This policy, by keeping the Committee's
holdings of longer-term securities at sizable levels, should help maintain
accommodative financial conditions.
When the Committee decides to begin to remove policy accommodation, it
will take a balanced approach consistent with its longer-run goals of
maximum employment and inflation of 2 percent. The Committee currently
anticipates that, even after employment and inflation are near
mandate-consistent levels, economic conditions may, for some time, warrant
keeping the target federal funds rate below levels the Committee views as
normal in the longer run.
Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair;
William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Stanley
Fischer; Dennis P. Lockhart; Jerome H. Powell; Daniel K. Tarullo; and John
C. Williams. Voting against the action was Jeffrey M. Lacker, who preferred
to raise the target range for the federal funds rate by 25 basis points at
this meeting.
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