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FOMC Meeting Announcement  
Released On 3/15/2017 2:00:00 PM
PriorConsensusConsensus RangeActual
Federal Funds Rate - Target Level0.50 to 0.75 %0.875 %0.75 % to 1.00 %0.75 to 1.00 %

Highlights
Two more rate hikes this year are still the call after the FOMC did what it was expected to today, raise the federal funds target range by 25 basis points to 0.75 and 1.00 percent. The outlook for rest of the year is unchanged in the FOMC forecasts, still at 1.4 percent for the federal funds rate which works out to two more 25 basis point hikes.

Change in statement language is centered in inflation which policy makers, based on the very gradual curve higher for the core rate, see stabilizing around their 2 percent target. They acknowledge that total inflation is already close to 2 percent though the core, which excludes food and importantly energy which has been on the climb, remains "somewhat below" target.

Another change is the description of business investment which they say has "firmed somewhat" from their January meeting when it was described as soft. Otherwise there are no significant changes with the economic expansion described once again as moderate, the labor market solid and continuing to strengthen, household spending on a moderate rise, consumer and business sentiment improved. Near-term risks are once again described as balanced and there is no mention of winding down the Fed's $4.5 trillion balance sheet. And of course there is no direct reference to the timing of the next rate hike.

The vote was 9 to 1 with Minneapolis' Kashkari voting for no hike. The results are neutral to expectations, with the Fed still confident it's not behind the inflation curve and willing to hold their cards close to their chest. Treasury rates are falling as is the dollar in early reaction. The Dow is rising slightly following the announcement.

Consensus Outlook
Having met their employment goals and with inflation nearly at target, the FOMC is expected to raise rates at their March meeting by 25 basis points to a range of 0.75 to 1.00 percent. This would be the 3rd rate hike this cycle. The Beige Book, which was compiled for this meeting, continued to describe economic activity as no better than modest to moderate though strong post-election confidence was noted and, importantly, that available labor is growing scarcer. Prospects of rising government stimulus have yet to affect policy as FOMC members wait for related efforts to take form in Washington. This meeting will include updated quarterly forecasts and a Janet Yellen press conference.

Definition
The FOMC meeting announcement is a policy statement issued at the conclusion of each meeting of the Federal Open Market Committee. It offers updates on economic conditions with special focus on the health of the labor market and the latest on inflation. It also updates the status of the federal funds target which is the FOMC's official policy interest rate. This rate is expressed within a range, such as 1.75 to 2.00 percent. The center of this range is the implied target. The higher this target, the more restrictive monetary policy becomes, the lower this target, the more accommodative policy becomes. Other policy tools are also discussed in the meeting announcement including updates on direct purchases of Treasuries and mortgage-backed securities. Debate is not offered in the statement, just the consensus view is expressed, though the statement does list the total committee vote and how each member voted.  Why Investors Care
 
[Chart]
The Fed closely monitors the core PCE price index to indicate whether or not policy is approximately correct, overly accommodative, or too restrictive. The PCE price index is preferred to the CPI because it is more closely aligned to the cost of living than the CPI [which measures a fixed basket of goods & services.] This chart covers monthly data and the fed funds target rate reflects the monthly average. As such, it will not correspond to the most recent fed funds rate target
Data Source: Haver Analytics
 

2017 Release Schedule
Released On: 2/13/155/36/147/269/2011/112/13
 


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