Newsroom
March 18, 2015
FOMC announces change in forward guidance; no rate change yet
The Federal Open Market Committee today announced it is changing its forward guidance on monetary policy despite not yet reaching the 2 percent inflation goal.
This move opens the door for the federal funds rate to be increased, though it still says that is unlikely to happen until after at least two more committee meetings have occurred. While the option to increase rates will be available at its June meeting, the committee maintained that it has not decided on the timing of the initial rate increase.
NAFCU Chief Economist and Director of Research Curt Long said, "The FOMC has to be feeling some uneasiness about its next rate move given that inflation continues to run so far below target, and we've had some weakness recently in retail sales and in the housing market. Nevertheless, the long-term positive trends in the labor market have simply been too big to ignore."
The committee said it would not increase rates until it is "reasonably confident" that inflation will make progress toward its long-term target of 2 percent. The Federal Reserve's preferred measure of inflation was up only 1.4 percent in December and has consistently run below the 2 percent target since the onset of the financial crisis.
The committee did not announce any changes in monetary policy activities, and it left the federal funds target rate unchanged at a range of 0 to 0.25 percent.
The FOMC's next policy-setting meetings are slated for late April and June.
During the FOMC's last meeting in January, the committee indicated it was in no rush to raise interest rates, and could remain "patient" with regard to its 2 percent inflation goal.
Long also put out a NAFCU Macro Data Flash report on the FOMC meeting on Wednesday.
This move opens the door for the federal funds rate to be increased, though it still says that is unlikely to happen until after at least two more committee meetings have occurred. While the option to increase rates will be available at its June meeting, the committee maintained that it has not decided on the timing of the initial rate increase.
NAFCU Chief Economist and Director of Research Curt Long said, "The FOMC has to be feeling some uneasiness about its next rate move given that inflation continues to run so far below target, and we've had some weakness recently in retail sales and in the housing market. Nevertheless, the long-term positive trends in the labor market have simply been too big to ignore."
The committee said it would not increase rates until it is "reasonably confident" that inflation will make progress toward its long-term target of 2 percent. The Federal Reserve's preferred measure of inflation was up only 1.4 percent in December and has consistently run below the 2 percent target since the onset of the financial crisis.
The committee did not announce any changes in monetary policy activities, and it left the federal funds target rate unchanged at a range of 0 to 0.25 percent.
The FOMC's next policy-setting meetings are slated for late April and June.
During the FOMC's last meeting in January, the committee indicated it was in no rush to raise interest rates, and could remain "patient" with regard to its 2 percent inflation goal.
Long also put out a NAFCU Macro Data Flash report on the FOMC meeting on Wednesday.
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