FOMC Targets To Guide Future Action

The Federal Open Market Committee left its federal funds rate target unchanged Wednesday but named specific targets for inflation and unemployment that will guide future policy decisions, a move NAFCU Chief Economist David Carrier said gives credit unions a helpful planning tool.

With Wednesday’s action, the FOMC said it leaving its fed funds rate target at a range of 0 to 0.25 percent. It says it expects this will be the appropriate course to maintain at least until:

  • unemployment remains above 6.5 percent;
  • inflation stays within a half a percentage point above the panel’s 2 percent long-run goal over the next one or two years; and
  • longer-term inflation expectations continue to be “well anchored.”Carrier said Wednesday’s announcement of specific inflation and unemployment targets was historic and speaks to the ongoing debate about whether more or less transparency can help the Fed achieve its objectives. Some argue that  more transparency helps markets and investors, and that helps the economy, he said, but others say less transparency gives the Fed more flexibility to respond to changing conditions.

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