FOMC Meeting: Key Takeaways

Wells Fargo Investment Institute shares its key takeaways from the Federal Reserve's decision to leave interest rates unchanged.

FOMC Meeting: Key Takeaways

September FOMC Meeting | September 20, 2017

Policy Announcement

The Federal Open Market Committee (FOMC) decided to maintain the current range for the federal funds target rate at 1.00 to 1.25 percent today. The FOMC reiterated that it expects economic conditions to evolve in a manner that will warrant gradual increases in the federal funds rate. The Federal Reserve (Fed) announced that it will begin reducing its balance sheet in October. The Fed will reduce Treasury purchases by $6 billion per month and mortgage-backed-security purchases by $4 billion per month.

Topic Details
Stated Reasons The labor market has continued to strengthen, and economic activity has been rising moderately.

Job gains have been solid; there has been a pickup in household spending; and business investment has continued to expand.

Inflation, excluding food and energy prices, has declined and is running below the Fed’s long-term target of 2 percent.

Looking Forward The FOMC continues to expect that the U.S. economy will expand at a moderate pace and that labor-market conditions will strengthen somewhat further.

The committee expects inflation to remain below 2 percent in the near term, but believes that it will approach this target over the medium term.

Near-term risks to the economic outlook appear roughly balanced.

What Else? The Fed continued to describe the path of future rate hikes as “gradual.”

The Fed will begin reducing the size of its balance sheet in October. This reduction initially will be $10 billion per month. We would expect the Fed to increase this amount by $10 billion each quarter if conditions warrant.

The vote was unanimous to keep the fed funds rate target range the same.

Market expectations of future rate-hike probabilities for December moved to higher levels after the Fed’s announcement.

The FOMC decision today had a relatively minor impact on the markets. Domestic bond yields increased. The U.S. dollar strengthened slightly, and most commodities moved higher. The Dow Jones Industrial Average and the Nasdaq Index moved minimally lower after the Fed news release but quickly snapped back.

Upcoming Meeting Schedule November 1 | December 13* | January 31 | March 21*

* Indicates press conference occurring as well.

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