U.S. Federal Reserve holds rates: Read the official statement

Release date: March 16, 2016

Information received since the Federal Open Market Committee met in January suggests that business activities continues to be expanding at a moderate pace regardless of the global economic and financial developments of latest months. Household spending continues to be increasing in a moderate rate, and also the housing sector has improved further; however, business fixed investment and net exports have been soft. A range of recent indicators, including strong job gains, suggests additional strengthening from the labor market. Inflation acquired in recent months; however, it continued to run below the Committee’s 2 per cent longer-run objective, partly reflecting declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months.

Consistent using its statutory mandate, the Committee seeks to foster maximum employment and value stability. The Committee currently expects that, with gradual adjustments within the stance of economic policy, business activities will expand at a moderate pace and labor market indicators will continue to strengthen. However, global economic and financial developments continue to pose risks. Inflation is anticipated to remain lower in the near term, partly due to earlier declines in energy prices, but to increase to 2 per cent within the medium term because the transitory results of declines in energy and import prices dissipate and also the labor market strengthens further. The Committee is constantly on the monitor inflation developments closely.

Against this backdrop, the Committee chose to maintain the target range for the federal funds rate at 1/4 to 1/2 percent. Setup of economic policy remains accommodative, thereby supporting further improvement in labor market conditions along with a go back to 2 percent inflation.

In determining the timing and size future adjustments to the prospective range for the federal funds rate, the Committee will assess realized and expected economic conditions in accordance with its objectives of maximum employment and 2 percent inflation. This assessment will take into consideration an array of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. Considering the present shortfall of inflation from 2 percent, the Committee will carefully monitor actual and expected progress toward its inflation goal. The Committee expects that economic conditions will evolve in a fashion that will warrant only gradual increases within the federal funds rate; the federal funds rates are prone to remain, for a while, below levels that are likely to prevail in the longer run. However, the actual path of the government funds rate will depend on the economic outlook as informed by incoming data.

The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction, also it anticipates doing so until normalization from the level of the federal funds rate is well arrived. This insurance policy, by continuing to keep the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.

Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; James Bullard; Stanley Fischer; Loretta J. Mester; Jerome H. Powell; Eric Rosengren; and Daniel K. Tarullo. Voting against the action was Esther L. George, who preferred at this meeting to boost the target range for that federal funds rate to 1/2 to 3/4 per cent.