The Fed’s statement on the November 01, 2017. FRS Comment on the Basic Interest Rate Decision

The Fed’s statement on the November 01, 2017. FRS comment on the basic interest rate decision

The maintenance of the basic interest rate in the target range of 1.00% -1.25%, the Federal Open Market Committee (FOMC) of the u.s. Federal Reserve commented on its decision and the current situation in the country.

The Fed has noted a significant increase in economic activity, despite the hurricanes that have caused destruction, the situation on the labour market continued to improve thanks to a constant reduction of the unemployment, even in the face of the decline in employment in September was introduced by the wake of the storms.

The Fed said that during the period between the meetings of the commission, the expenses of the family showed a moderate expansion, and the growth of investment in business structures has increased dramatically over the last few quarters.

The Fed is continuing to assess long-term inflation expectations stable. At the same time, the total inflation and the core inflation is calculated on a 12-month basis, which does not include energy and food prices, this year has declined and remained below 2%. The rising price of gasoline, after the impact of hurricanes. But the core inflation remained at the same level. Compensatory has the same impact on inflation, the markets, and continues to be implemented to a low extent.

In the respect of its authority, the Fed seeks to promote full employment and price stability. The damage and the restoration of works by hurricanes will affect economic activity, employment and inflation in the near future, but the previous experiments show that the impact of the economic growth in the medium term. Consequently, the Fed expects that the gradual regulation of the monetary policy expansion in economic activity at a moderate pace and strengthen the labour market. Annual inflation is expected to remain slightly below 2% in the near future, but should stabilize close to the Fed target level of 2% in the medium term. The short-term risks to the economic outlook looks fairly balanced, but the Fed will continue to closely monitor inflation.

Given the previously obtained and expected parameters of the labour market and inflation, the Federal Reserve has decided to keep the range of the federal funds target rate to 1.00% -1.25%. The basic principles of the monetary policy will remain quite flexible, offering support for the improvement of labour market conditions and a constant return of inflation towards 2%.

To determine the timing and scope of future regulation of the range of the federal funds target, the Fed will be guided by the two obtained and anticipated progress towards the long-term objectives of maximum employment and 2% inflation. This approach will be based on a wide range of information, including parameters of labour market conditions, indicators of inflation pressures and inflation expectations, financial and international events. The Fed will continue to closely monitor the actual results and the forecast of inflation processes in relation to its symmetrical inflation rate target. The Fed expects that economic conditions are going to develop a way to provide a smooth increase in the interest rate on federal funds, and it will probably remain for some time below the levels that should prevail in the long term. However, the real interest rate trajectory for the federal funds depend on the economic trends in compliance with the incoming data.

The program of normalization of the Fed’s balance sheet, which started in October 2017, continues to be implemented.

The current fundamentals of the monetary policy were unanimously adopted by the 9 members of the Federal Open Market Committee of the Federal Reserve system.

* This market analysis is for information purposes and does not constitute a guide of the transaction.

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