Since the Federal Open Market Committee met in July, information received indicated that the labor market continued to strengthen and economic activity expanded moderately so far this year. Job gains have performed relatively strong in recent months, while the unemployment rate has remained low.
Household spending according to the Federal Reserve has expanded at a moderate pace and business fixed investment have continued to expand prior quarters. On a 12-month basis, overall inflation and the measure excluding food and energy prices have declined and are running below 2%. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance. According to the Fed, “The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 percent inflation.”
The Fed indicated that, “near-term risks to the country’s economic outlook appear roughly balanced, but the Committee is monitoring inflation developments closely.” Given this, along with the Fed’s view of “realized and expected labor market conditions and inflation”, the Committee decided to uphold the target range for the federal funds rate at 1% to 1.25%.