The Federal Open Market Committee(FOMC) reaffirms the US Fed’s favorable forecast on the general state of the US economy and puts down rate hike concerns in the near future, but the FOMC board expects a slowdown of US real GDP growth in the coming year.
The latest FOMC minutes released covering the board meeting that took place on September 16-17 had delivered a favorable assessment on the short-term US economy. In terms of general economy, the minutes stipulate, “The information reviewed for the September 16-17 meeting suggested that real gross domestic product (GDP) was expanding at a moderate pace in the third quarter. Labor market conditions continued to improve, but labor compensation gains were modest.”
“Consumer price inflation remained below the Committee’s longer-run objective of 2 percent and was restrained by further declines in energy prices and non-energy import prices. Survey measures of longer-run inflation expectations remained stable, while market-based measures of inflation compensation moved lower.”
Even so, the minutes suggests that FOMC to take a more cautious look at the US economy for the remaining quarters of 2015, expecting a slower growth over the next several years, “The U.S. economic forecast prepared by the staff for the September FOMC meeting was a little weaker, on balance, than the one prepared for the July FOMC meeting. Recent information on real U.S. economic activity was generally stronger than expected, but equity prices declined, the foreign exchange value of the dollar appreciated further, and indicators of foreign economic growth were generally weak. The staff left its forecast for real GDP growth over the second half of the year little changed but lowered its projection for economic growth over the next several years.”
In consideration of the moderate US economic growth, as well as the slowdown of major global economies in particular that of China, the FOMC suggests to maintain the target range for the federal funds rate at 0 to 1/4 %. All policy actions will be geared towards the FOMC’s goals of maximum employment and 2% inflation.
The only dissident to the current FOMC policy actions came from Jeffrey M. Lacker of the Federal Reserve Bank of Richmond. He voted against the minutes on the grounds that maintaining low Fed rate would not be appropriate for an economy with “persistent strong consumption growth and tightening labor markets.”BM