FOMC Leaves Fed Funds Rate Unchanged

At today’s meeting of the Federal Open Market Committee, the target for the federal funds rate was left unchanged in a range of 5.00%-5.25%, leaving the rate at its highest level since August 2007.

In a statement accompanying today’s meeting, the Fed indicated that additional action may be forthcoming. “Holding the target range steady at this meeting allows the Committee to assess additional information and its implications for monetary policy.”

The Fed released new economic projections, stating that “tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation. The extent of these effects remains uncertain. The Committee remains highly attentive to inflation risks.”

The statement also indicated that “the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in its previously announced plans.”

Each member of the FOMC voted in favor of today’s action.

The press release for today’s FOMC meeting can be found here.

There were three significant changes to the Fed’s economic projections at this meeting. The first was to raise expected GDP growth this year (4Q/4Q) to 1.0% from 0.4%, then continuing at a little-changed 1.1% next year and 1.8% in 2025. The second was to lower the expected unemployment rate in the fourth quarter of this year to 4.1% from 4.5%, then 4.5% at yearend in both of the next two years. The third was to raise expected core PCE inflation this year to 3.9% (4Q/4Q) from 3.6%, then a little-changed 2.6% next year and 2.2% in 2025.