Banking and Finance Law Daily Economic activity continues rising at moderate rate; ‘funds’ rate unchanged
Wednesday, December 11, 2019

Economic activity continues rising at moderate rate; ‘funds’ rate unchanged

By Thomas G. Wolfe, J.D.

Indicating that the unemployment rate remains low and household spending has been rising at a strong pace, the FOMC decided to maintain the current federal funds rate.

Based on information it has received since it last met in late October, the Federal Open Market Committee decided unanimously to maintain the target range for the federal funds rate at its existing 1.50- to 1.75-percent level. In reviewing incoming information for the economic outlook, the FOMC continues to monitor "global developments and muted inflation pressures" as it assesses the "appropriate path" of the target range for the federal funds rate, the Committee stated.

Economic outlook. The FOMC reported that although household spending "has been rising at a strong pace," business fixed investment and exports "remain weak." At the same time, the labor market "remains strong," job gains have been "solid, on average, in recent months," and the unemployment rate has "remained low."

In addition, on a 12-month basis, overall inflation and inflation for items other than food and energy "are running below 2 percent," the Committee said. Meanwhile, market-based measures of inflation compensation "remain low," and survey-based measures of longer-term inflation expectations "are little changed." According to the FOMC, the "current stance of monetary policy is appropriate to support sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2-percent objective."

In communicating its economic outlook, the FOMC released charts and tables depicting its economic projections.

Federal funds rate. In keeping with its statutory mandate, the Committee seeks to foster maximum employment and price stability. In support of these goals, the FOMC unanimously decided to keep the target range for the federal funds rate at the present 1.50- to 1.75-percent level.

In connection with future determinations of the timing and size of an adjustment to the target range, the Committee "will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective." According to the FOMC, this assessment "will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments."

Primary credit rate. The primary credit "discount" rate is the interest rate charged for short-term credit extensions to depository institutions. As reflected in its Dec. 11, 2019, "Decisions Regarding Monetary Policy Implementation," the Federal Reserve voted unanimously to approve the establishment of the primary credit discount rate at the existing 2.25-percent level, which previously took effect Oct. 31, 2019.

MainStory: TopStory FederalReserveSystem FinancialStability FOMC InterestUsury SecuritiesDerivatives

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