At its meeting today, the Federal Open Market Committee (FOMC) unanimously voted to raise the target range for the federal funds rate to 2.25 to 2.5 percent. It was the fourth hike this year. However, the committee signaled only two rate increases next year, down from three in its previous projections.
Committee members kept in the language that they expect “further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective over the medium term.” The statement did change from that of November by adding in a statement that the Committee “will continue to monitor global economic and financial developments and assess their implications for the economic outlook.”
The Committee’s revised economic projections raised the forecast for 2018 GDP growth from 3.1 to 3.0 percent and the forecast for 2019 GDP growth from 2.5 to 2.3 percent. Additionally, they nudged down the projected 2019 year-end reading of PCE inflation from 2.0 to 1.9 percent.
The balance sheet normalization program continues to be carried out as planned. The program has reached its terminal level, as up to $30 billion of Treasury securities and $20 billion of agency mortgage-backed securities are being rolled off the balance sheet per month.
Read the FOMC statement and economic projections.
