FOMC maintains federal funds rate range of 1.75% to 2%

by Talk Business & Politics staff ( 103 views 

The Federal Open Market Committee kept the target range for the federal funds rate at 1.75% to 2% as existing monetary policy supports strong labor market conditions and a return to 2% inflation, according to a committee statement. In its meeting July 31 to Aug. 1, the FOMC agreed to maintain the existing rate after increasing the rate by 25 basis points at its June meeting.

The federal funds rate, or the rate banks charge each other for overnight loans, is used to determine the interest rate one would receive on a loan. The committee has increased the federal funds rate twice this year.

Since the June meeting, the labor market has continued to strengthen and economic activity has risen, according to the FOMC statement. Job gains have improved, and the unemployment rate has been low. Household spending and business fixed investment has increased. Overall inflation and inflation for items, excluding food and energy, remain at about 2%. Long-term expectations on inflation have not changed.

The committee expects that continued increases in the federal funds rate will lead to growth in economic activity, improved labor market conditions and inflation near the committee’s 2% goal over the medium term. The committee will determine when and by how much it will increase the rate after assessing existing and expected economic conditions as they relate to the committee’s goals of maximum employment and 2% inflation.