As it reduced the base interest rate by 25 basis points to a target range of 2.00-2.25%, the Federal Open Market Committee of the US Federal Reserve commented on its decision and the current situation in the country:
The Fed has noted an increase in economic activity at a moderate pace and the strong position of the labor market due to the moderate growth of jobs in recent months and the remaining low unemployment rate.
The Fed states that although family expenses have increased in comparison with the beginning of the year, the growth dynamics of investments by business structures is weak.
The Fed continues to assess long-term inflation expectations as stable. At the same time, total inflation and core inflation calculated on the basis of a 12-month period, which does not take into account energy and food prices, are below 2%. The compensatory effect on inflation on the part of markets continues to be implemented to a small extent.
The Fed is committed, in accordance with its authority, to promote maximum employment and price stability. In light of the impact of global events on economic prospects, as well as taking into account moderate inflationary pressure, the Fed decided to lower the target interest rate range for federal funds to 2.00 -2.25%. This action confirms the Fed's view that sustainable expansion of economic activity, strengthening the labor market and inflation, close to the symmetrical 2% target level indicated by the Fed, are the most likely trends. However, uncertainty regarding the realization of these prospects remains. As the Fed considers the further trajectory of the target interest rate range for federal funds, it will continue to closely monitor incoming information and its economic consequences and will act accordingly to support development in the presence of a strong labor market and inflation close to a symmetrical target level of 2%.
In determining the timing and scope of future regulation of the target interest rate range for federal funds, the Fed will be guided by both achieved and expected economic progress in comparison with its goals of strong employment and symmetrical inflation at 2%. This approach will be based on a wide range of information, including parameters of labor market conditions, indicators of inflationary pressure and inflation expectations, financial and international events.
The Fed will complete a reduction in its aggregate balance of ownership of securities in the System Open Market Account in August, two months earlier than the previously designated period.
The current monetary policy framework was adopted by a majority of votes (8 vs 2). The final decision was not supported by the President of the Federal Reserve Bank of Kansas City, Esther George, and the President of the Federal Reserve Bank of Boston, Eric S. Rosengren, who proposed at this meeting to keep the target interest rate range for federal funds 2.25 -2.50%.
