Wednesday, Dec. 19 FOMC Meeting Statement: Federal Funds Rate Increased

The Federal Open Market Committee (FOMC) - the board of directors of the Federal Reserve increased the federal funds rate as expected, and stated:

.... The Committee judges that some further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective over the medium term ....

Overall the Fed appears to believe the economy was generally stronger since the last meeting.

Analyst Opinion of the FOMC Meeting Minutes

There is really nothing unexpected in these meeting minutes - and the pundits who believed there would be no raising of the federal funds rate were wrong. The economic projection of the FOMC members is at the end of this post. CoreLogic Chief Economist, Dr. Frank Nothaft, had the following to say:

The Federal Reserve's increase in its federal funds target of 0.25 percentage points, to a target range of 2.25 to 2.5 percent, is consistent with the latest data on labor markets and inflation. The economy has produced an average of 170,000 nonfarm jobs over the September-to-November period, and the unemployment rate has remained at a 49-year low of 3.7 percent. Further, the latest inflation reading for personal consumption expenditures is running at 2 percent (October over October), and 1.8 percent excluding food and energy, consistent with the Fed's long-term inflation goal. The Fed considers monetary policy as accommodative for economic growth and prefers to raise short-term interest rates gradually to reduce the degree of economic stimulus coming from low interest rates. The rise in the federal funds target will increase other short-term interest rates, including those that serve as an index for adjustable-rate mortgages and HELOCs.

The Federal Funds rate was revised up. Econoday consensus forecast was for a quarter point rise in the Federal Funds rate.

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