Fed Officials Say Labor Market Not Strong Enough for Rate Increase

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first_imgFed Officials Say Labor Market Not Strong Enough for Rate Increase in Daily Dose, Government, Headlines, News July 29, 2015 549 Views Although Federal Reserve officials determined that economic activity is expanding moderately, the housing sector has shown additional improvement, and job gains have been solid with declining unemployment, the federal funds rate will remain the same at a target range of 0 to 1/4 percent, according to the Federal Open Market Committee (FOMC) July meeting.”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,” a FOMC statement said.No specific timeline of when the federal funds rate would be raised was provided at the meeting.The Committee also determined that labor market indicators found that underutilization of labor resources have diminished slightly, and growth in household spending has been moderate, while the housing sector showed some improvement. However, business fixed investment and net export remained soft. More importantly, inflation is still running below the Committee’s objective of 2 percent, reflecting earlier drops in energy prices and falling prices of non-energy imports. Looking ahead, the Committee still expects a moderate pace of GDP growth, with continuing job gains and lower energy prices supporting household spending.The Committee noted that it will assess both realized and expected progress in determining how long to maintain the near zero target range toward its maximum employment and 2 percent inflation objectives. The assessment will consider labor market conditions, inflation indicators, and 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 FOMC said.The FOMC also mentioned that it 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. They believe this policy should help maintain accommodative financial condition by keeping the Committee’s holdings of longer-term securities at sizable levels.Janet Yellen, FOMC chair revealed at a mid-July House Financial Services Committee hearing that rates would be raised upon improving economic conditions at no particular time.“At our meeting that ended today, the Committee concluded that these conditions have not yet been achieved. It remains the case that the Committee will determine the timing of the initial increase in the federal funds rate on a meeting-by-meeting basis, depending on its assessment of incoming economic information and its implications for the economic outlook.”However, Yellen did allude to the rate increase possibly occurring before the end of the year in a Senate Banking Committee hearing also held in mid-July .”If the economy evolves as we expect, economic conditions likely would make it appropriate at some point this year to raise the federal funds rate target, thereby beginning to normalize the stance of monetary policy,” Yellen said. “Indeed, most participants in June projected that an increase in the federal funds target range would likely become appropriate before year-end. But let me emphasize again that these are projections based on the anticipated path of the economy, not statements of intent to raise the rates at any particular time.”The committee has three more meetings this year in September, October, and December to still raise rates.center_img Federal Funds Rate Federal Open Market Committee Federal Reserve 2015-07-29 Staff Writer Sharelast_img

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