Fed Holds Steady

Though the Committee noted that economic activity has expanded moderately after the first quarter, the Federal Reserve Open Market Committee in its June meeting reaffirmed its view that the current 0% to 0.25% target range for the federal funds rate remains appropriate.

Despite holding steady this meeting, the FOMC forecasts still show that a rate increase is likely before the end of this year.

The Committee in its statement noted that though growth in household spending and the housing sector has improved, business fixed investment and net exports were “soft” and inflation was still running below long-term objectives.

“While the committee views the disappointing economic performance in the first quarter as largely transitory, my colleagues and I would like to see more decisive evidence that a moderate pace of economic growth will be sustained,” Chairman Janet Yellen said during her post-statement press conference.

The chair also reemphasized her view that the course of the rate increases will not be pre-determined.

“We absolutely do not expect to follow any mechanical 25 basis points a meeting, 25 basis points every other meeting – no plan to follow any type of mechanical approach to raising the federal funds rate. We will evaluate incoming conditions and move in the manner that we regard as appropriate.”

According to FOMC member projections, the majority of Committee members expect the federal funds rate to reach 0.625% by the end of 2015.