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Economy in Brief

FOMC Increases Federal Funds Rate; Suggests More to Come
by Tom Moeller  December 16, 2015

At today's meeting of the Federal Open Market Committee, the Fed raised the federal funds rate to a target range of 0.25% to 0.50% from 0.00% to 0.25%. The rate had been steady since December 2008, having fallen from a 5.25% high in August 2007. The Fed also indicated an appropriate rate of 1.4% by the end of 2016, 2.4% by the end of 2017 and 3.3% in 2018.

The Fed cited "considerable improvement in the labor market this year" and confidence that "inflation will rise, over the medium term, to its 2% objective."

Economic projections accompanying today's meeting were little-changed, calling for 2.1% real GDP growth this year, 2.4% next year, 2.2% in 2017 then 2.0% in 2018. Price inflation was expected to increase. The "core" PCE price index was expected to rise 1.3% this year, 1.6% next year, 1.9% in 2017, and 2.0% in 2018. The labor market was expected to remain tight. The unemployment rate was projected to average 5.0% in 2015, then 4.7% from 2016 to 2018.

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

The backdrop to today's meeting were M2 growth of 6.0% y/y and monetary base growth of 4.6% y/y. In addition, the foreign exchange value of the U.S. dollar has risen 11.9% during the past year.

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

Current Last 2014 2013 2012 2011
Federal Funds Rate, % (Target) 0.25-0.50 0.00-0.25 0.09 0.11 0.14 0.10
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