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FOMC Leaves Interest Rates Unchanged
Friday, July 29, 2016 6:45 AM

Credit Union National Association said the Federal Open Market Committee’s decision not to change interest rates Wednesday was cautious and optimistic.

“The FOMC’s decision to keep the federal funds rate unchanged at its meeting today confirms our view that U.S. economic growth continues to be modest,” CUNA Senior Economist Perc Pineda said. “Brexit has had minimal effects on the U.S. financial market so far, the dismal May job numbers were an aberration, given strong job gains in June, and inflation is creeping up; but the uncertainty of the pace of economic expansion has kept the FOMC cautious. We will know how the U.S. economy has fared recently Friday when the second quarter GDP advance estimates arrive.”

The FOMC last raised the federal funds target rate to a range of 0.25 percent to 0.5 percent in December 2015.

In its statement, the FOMC noted the labor market strengthened and economic activity has been expanding at a moderate rate.

“On balance, payrolls and other labor market indicators point to some increase in labor utilization in recent months,” the FOMC stated. “Household spending has been growing strongly but business fixed investment has been soft. Inflation has continued to run below the committee's 2 percent longer-run objective, partly reflecting earlier declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation remain low; most survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months.”

The FOMC said the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook from incoming data.

The committee will meet for another two-day policy setting session Sept. 20 and 21.