December 18, 2024
January 29, 2025
Federal Reserve issues FOMC statement
For release at 2:00 p.m. EST
Recent indicators suggest that economic activity has
continued to expand at a solid pace. Since earlierThe
unemployment rate has stabilized at a low level in the
year, recent months, and labor market
conditions have generally eased, and the unemployment rate has
moved up but remains low.remain solid.
Inflation has made progress toward the Committee’s 2 percent
objective but remains somewhat elevated.
The Committee seeks to achieve maximum employment and
inflation at the rate of 2 percent over the longer run. The Committee judges
that the risks to achieving its employment and inflation goals are roughly in
balance. The economic outlook is uncertain, and the Committee is attentive to
the risks to both sides of its dual mandate.
In support of its goals, the Committee decided to lowermaintain
the target range for the federal funds rate by 1/4 percentage
point toat 4-1/4 to 4-1/2 percent. In
considering the extent and timing of additional adjustments to the target range
for the federal funds rate, the Committee will carefully assess incoming data,
the evolving outlook, and the balance of risks. The Committee will continue
reducing its holdings of Treasury securities and agency debt and agency
mortgage‑backed securities. The Committee is strongly committed to supporting
maximum employment and returning inflation to its 2 percent objective.
In assessing the appropriate stance of monetary policy, the
Committee will continue to monitor the implications of incoming information for
the economic outlook. The Committee would be prepared to adjust the stance of
monetary policy as appropriate if risks emerge that could impede the attainment
of the Committee’s goals. The Committee’s assessments will take into account a
wide range of information, including readings on labor market conditions,
inflation pressures and inflation expectations, and financial and international
developments.
Voting for the monetary policy action were Jerome H. Powell,
Chair; John C. Williams, Vice Chair; Thomas I. Barkin; Michael
S. Barr; Raphael W. Bostic; Michelle W. Bowman;
Susan M. Collins; Lisa D. Cook; Mary
C. DalyAustan D. Goolsbee; Philip N.
Jefferson; Adriana D. Kugler; Alberto G.
Musalem; Jeffrey R. Schmid; and Christopher J. Waller.
Voting against the action was Beth M. Hammack, who preferred to maintain the
target range for the federal funds rate at 4-1/2 to 4-3/4 percent.
1. Economic Activity:
- December: “Economic activity has continued to expand at a solid pace. Since earlier in the year, labor market conditions have generally eased, and the unemployment rate has moved up but remains low.”
- January: “Economic activity has continued to expand at a solid pace. The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid.”
- Key Change:
- December: Recognized a softening in labor market conditions and a slight rise in unemployment.
- January: Describes the unemployment rate as stable and labor market conditions as solid, suggesting less concern about labor market weakness.
2. Inflation:
- December: “Inflation has made progress toward the Committee’s 2 percent objective but remains somewhat elevated.”
- January: “Inflation remains somewhat elevated.”
- Key Change:
- December: Acknowledged progress toward the inflation target.
- January: Removed reference to progress, focusing instead on inflation remaining elevated, signaling ongoing concerns.
3. Monetary Policy Decision:
- December: “The Committee decided to lower the target range for the federal funds rate by 1/4 percentage point to 4-1/4 to 4-1/2 percent.”
- January: “The Committee decided to maintain the target range for the federal funds rate at 4-1/4 to 4-1/2 percent.”
- Key Change:
- December: Reduced rates by 0.25%.
- January: Held rates steady, signaling a pause in rate cuts as the Fed assesses evolving conditions.
4. Risk Assessment:
- December: “The Committee judges that the risks to achieving its employment and inflation goals are roughly in balance. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate.”
- January: Identical language.
- Key Change: None, indicating continued caution regarding balanced risks and uncertainty in the economic outlook.
5. Committee Membership and Voting:
- December: Included Mary C. Daly as a voting member.
- Beth M. Hammack dissented, preferring a higher target rate range of 4-1/2 to 4-3/4%.
- January: Replaced Mary C. Daly with Austan D. Goolsbee.
- No dissenting votes were recorded.
- Key Change:
- New voting member and no dissent in January, signaling greater consensus within the committee.
6. Balance Sheet Reduction:
- December and January: Both statements reaffirmed the Fed’s commitment to reducing its holdings of Treasury securities, agency debt, and mortgage-backed securities.
- Key Change: None.
Summary of Key Differences:
- Labor Market Tone: December emphasized easing conditions and rising unemployment, while January described stability and solid conditions.
- Inflation: December acknowledged progress, while January removed this reference, highlighting persistent elevation.
- Rate Decision: December featured a rate cut, while January maintained the existing target range.
- Voting Changes: January saw a new voting member (Austan D. Goolsbee) and no dissent, unlike December’s dissent from Beth M. Hammack.
Overall, the January statement reflects a more neutral stance, with less emphasis on labor market softening, ongoing inflation concerns, and a pause in rate adjustments.
This article was written by Greg Michalowski at www.forexlive.com. Source