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Economy in Brief

FOMC Indicates Patience Toward Raising Rates
by Tom Moeller  December 17, 2014

At today's meeting of the Federal Open Market Committee, the Fed indicated, "Based on its current assessment (of the economy), the Committee judges that it can be patient in beginning to normalize the stance of monetary policy." The Fed also indicated that despite improvement, "economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run."

Several indicators of economic improvement were noted including "solid" job gains and a lower unemployment rate. Consumer spending and business investment were seen to have risen moderately. The housing recovery, however, was judged to be slow.

Lower energy prices were seen as holding the overall inflation rate down. The Fed also indicated that "longer-term inflation expectations have remained stable."

The Fed released its updated projections for economic activity. Real GDP is expected to grow 2.8% next year and in 2016, before slowing to 2.4% in 2017. The unemployment rate is expected to fall from 5.25% in 2015 to 5.10% in 2017. PCE inflation should total 1.3% next year then 1.9% both in 2016 and 2017. Core price growth of 1.7% is projected for next year then 1.9% in 2016 & 2017.

The press release for today's FOMC meeting can be found here.

The backdrop to today's meeting was slower M2 growth of 6.0% y/y and little growth in the monetary base.

Haver's SURVEYS database contains the economic projections from the Federal Reserve Board.

Current Last 2013 2012 2011 2010
Federal Funds Rate, % (Target) 0.00-0.25 0.00-0.25 0.11 0.14 0.10 0.17
Discount Rate, % 0.75 0.75 0.75 0.75 0.75 0.72
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