Must-Read: FOMC: Press Release–June 15, 2016

Must-Read: Somebody really should have dissented from this press release: if 0.5% is the forecast of the appropriate Fed Funds rate in 2018, zero is the appropriate Fed Funds rate now.

But who? Charlie Evans or Lael Brainard? I would bet Lael, based solely on the Fed convention that a Governor’s dissent is a much bigger deal than a Regional Bank President’s dissent. But that is only a guess: I do not know…

Https www federalreserve gov monetarypolicy files fomcprojtabl20160615 pdf

FOMC: Press Release–June 15, 2016: “The pace of improvement in the labor market has slowed while growth in economic activity appears to have picked up…

…Inflation has continued to run below the Committee’s 2 percent longer-run objective, partly reflecting earlier declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation declined; most survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months…. The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market indicators will strengthen. Inflation is expected to remain low in the near term, in part because of earlier declines in energy prices, but to rise to 2 percent over the medium term…. Against this backdrop, the Committee decided to maintain the target range for the federal funds rate…. In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation…. The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data…

June 15, 2016


Brad DeLong
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