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

August 9, 2018
Wambolt Team

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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