No September Rate Increase

The Federal Reserve Open Market Committee elected not to raise the federal funds rate in September. In a statement released post-meeting, the Fed once again stated that the U.S. economy showed signs of moderate expansion and labor market improvement. However inflation has continued to run below long-run objectives – in some part due to declines in energy prices and non-energy imports.

September June

Despite low inflation, the FOMC continues to see the outlook for economic activity and the labor market as “nearly balanced,” and expects inflation to rise gradually toward 2 percent over the medium term.

During the post statement press-conference, Federal Reserve Chair Janet Yellen stated that the possibility of raising rates today was discussed, but ultimately it was decided that now was not the appropriate time. Chair Yellen continues to expect it will be appropriate to increase the federal funds rate later this year. Of the voting members of the Committee, all but Richmond Federal Reserve President Jeffrey Lacker voted to hold the target rate between 0 and 25 basis points.

Thirteen members in total believed that it would be appropriate to raise rates before the end of the year, down from fifteen during the June meeting. The Committee’s median projections for rates moved down 2 basis points, falling to an expectation of a 1.4 percent interest rate at the end of 2016.

The Committee’s long-term unemployment rate moved from down 0.1 percentage point from 5.0 percent in the June meeting to 4.9 percent. The long-term median for long-term PCE inflation, as well as change in real GDP, remained at 2 percent.

Read the Federal Reserve statement.