Federal funds rate held steady as economic activity is “strong”

The Federal Reserve held short term rates steady in its most recent Federal Open Market Committee (FOMC) on August 1 but signaled a rise likely to come in September. Increases in the federal funds rate raise the costs of credit card debt and adjustable-rate mortgages.

According to Fed’s news release, the central bank’s policymaking committee was acting on data indicating the:

  • Labor market has continued to strength
  • Economic activity has been rising at a strong rate
  • Job gains have been strong, on average
  • Unemployment rate has stayed low
  • Household spending and business fixed investment has grown strongly
  • Inflation overall and inflation for items other than food and energy remain near 2 percent
  • Indicators of longer-term inflation expectations are little changed

In view of these indicators, the Committee decided to keep the target range for the federal funds rate steady at 1-3/4 to 2 percent. The key rate has been bumped up seven times since late 2015.

The 12-member FOMC meets roughly once every six weeks to discuss economy and policy options. The next meeting is scheduled September 25-26, and will include a Summary of Economic Projections and a press conference by Chairman Powell. Please contact us if you have any questions.

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