FOMC lowers federal funds rate

August 18, 2019


Based on information collected since the Federal Open Market Committee (FOMC) met in July 2019, the findings suggested modest growth in economic activity as the labour market remained strong. The unemployment rate has remained low, while job gains have been solid in recent months. Additionally, there were also indication of an increase in household spending amid weakening business fixed investment and exports.

The inflation rate for the last twelve months for items other than food and energy according to the FOMC, is running below 2%. The FOMC noted, “Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed.”

In line with its mandate, the Committee seeks to bolster maximum employment and price stability. The FOMC stated, “In light of the implications of global developments for the economic outlook as well as muted inflation pressures, the Committee decided to lower the target range for the federal funds rate to 1.75% to 2.00%.”

The FOMC expressed that this supports the Committee’s view that sustained expansion of economic activity, strong labour market and conditions, and inflation near the Committee’s symmetric 2% objective are the most likely outcomes, but uncertainties about this outlook remain. With its focus towards the future path for the federal funds rate, the FOMC will carry on with monitoring the implications of incoming information for the economic outlook and will act appropriately to sustain the expansion with a strong labour market an inflation near its 2% objective.

As part of its policy decision, the FOMC voted to authorize and direct the Open Market Desk at the Federal Reserve Bank of New York, until instructed otherwise, to execute transactions in the System Open Market Account in accordance with the following domestic policy directive:

“Effective September 19, 2019, the Federal Open Market Committee directs the Desk to undertake open market operations as necessary to maintain the federal funds rate in a target range of 1-3/4 to 2 percent, including overnight reverse repurchase operations (and reverse repurchase operations with maturities of more than one day when necessary to accommodate weekend, holiday, or similar trading conventions) at an offering rate of 1.70 percent, in amounts limited only by the value of Treasury securities held outright in the System Open Market Account that are available for such operations and by a per-counterparty limit of $30 billion per day.”


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