federal reserve

What did the Federal Reserve say, and what does it all mean?

Federal Reserve »

Janet Yellen | Win McNamee/Getty Images

Federal Reserve policymakers wrapped up their July meeting by leaving interest rates unchanged -- which sounds pretty simple. But the officials explained their decision in typically complicated fashion. Here, we show you what their statement says, and translate -- so you can understand what it means.

RATE SEARCH: Shop today for a great deal on a mortgage.


What the Fed said:

Information received since the Federal Open Market Committee met in June indicates that the labor market strengthened and that economic activity has been expanding at a moderate rate. Job gains were strong in June following weak growth in May. On balance, payrolls and other labor market indicators point to some increase in labor utilization in recent months. Household spending has been growing strongly but business fixed investment has been soft.

What the Fed meant:

Things are looking much better since we last met up. We had a very strong June employment report that put us back on track for decent job growth this year. The stock market has hit new all-time highs (not that we care about that, but still). New housing starts are up about 5% since the beginning of the year, and consumer spending keeps growing.

The only downside worth mentioning right now is that businesses aren't investing in themselves -- buying new machines, building new buildings, developing new technology -- as much as we'd like.

All in all, we're feeling pretty confident that the global economy won't implode while we're taking the month off from FOMC meetings for Jackson Hole, Wyoming.

Jackson Hole | Rick Rowell/Getty Images

What the Fed said:

Inflation has continued to run below the Committee's 2 percent longer-run objective, partly reflecting earlier declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation remain low; most survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months.

What the Fed meant:

The rate at which prices are increasing is running at about half-speed compared with our target, so we're a long way off from losing sleep over inflation.

Traffic © Bohbeh/Shutterstock.com

RATE SEARCH: Find an interest-paying checking account near you today.


What the Fed said:

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market indicators will strengthen. Inflation is expected to remain low in the near term, in part because of earlier declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of past declines in energy and import prices dissipate and the labor market strengthens further. Near-term risks to the economic outlook have diminished. The Committee continues to closely monitor inflation indicators and global economic and financial developments.

What the Fed meant:

We expect the job market to keep getting stronger and inflation to rise gradually toward our target.

In fact, everything would be great if a certain country hadn't decided to leave a certain massive economic community and throw a certain global economy right back into panic mode.

We're looking at you, Britain, and frankly, we'd be enjoying our summer a lot more if you'd decided to do the smart thing and remain in the EU.

As it is, there's really no way to predict how the negotiations over the EU-U.K. divorce are going to go, and any big setbacks there could be a destabilizing force in the US economy in the years ahead. So that's just great.

Consider this a warning that we may have to cancel our Fed field trip to The Wizarding World of Harry Potter at Universal Studios if this continues.

Harry Potter | RichPolk/Universal Studios/Getty Images

What the Fed said:

Against this backdrop, the Committee decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent. The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation.

What the Fed meant:

Of course we're not doing anything. Why are you even reading this? Isn't everyone on vacation? Live a little. Jeez.

Vacation © Tom Wang/Shutterstock.com

What the Fed said:

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. In light of the current 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 manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

What the Fed meant:

We're going to make our rate-hike decisions based on the data coming out of the economy, rather than on some preset schedule. And even if we do decide to hike a little here and there, you can expect overall interest rates to stay low for a loooooooooonnnnnnggggg time.

Clock © Elegant Solution/Shutterstock.com

What the Fed said:

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, and it anticipates doing so until normalization of the level of the federal funds rate is well under way. This policy, by keeping the Committee's holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.

What the Fed meant:

We're going to keep rolling over all those mortgage-backed investments and Treasuries to keep long-term rates lower. Refinancers and homebuyers, you're welcome.

Happy home © Andy Dean Photography/Shutterstock.com

What the Fed said:

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 raise the target range for the federal funds rate to 1/2 to 3/4 percent.

What the Fed meant:

Esther L. George is the only one who voted against the group. On an unrelated note, we have no idea who throttled back the air conditioning in her office.

Woman in office holding fan | Paul Bradbury/Getty Images

advertisement

Show Bankrate's community sharing policy
          Connect with us
advertisement
advertisement

Blog

Holden Lewis

Ho-hum GDP report keeps lid on mortgages

Today's weak report on 2nd quarter gross domestic product is welcome news for mortgage shoppers.  ... Read more

advertisement

Connect with us