federal reserve

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

What the Fed said:

Information received since the Federal Open Market Committee met in April indicates that the pace of improvement in the labor market has slowed while growth in economic activity appears to have picked up. Although the unemployment rate has declined, job gains have diminished. Growth in household spending has strengthened. Since the beginning of the year, the housing sector has continued to improve and the drag from net exports appears to have lessened, but business fixed investment has been soft.

What the Fed meant:

Basically, the numbers have been all over the place. Yes, the unemployment rate is down, but the economy is creating fewer jobs than we expected and businesses aren't making the kind of long-term investments in themselves you'd expect in good economic times.

On the other hand, American households are spending more, and people overseas look to be buying more American goods.

In technical terms, it's a big ol' pile of meh.

Sad kid | John Slater/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 declined; most survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months.

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. The Committee continues to closely monitor inflation indicators and global economic and financial developments.

What the Fed meant:

The rate that prices are increasing is still below our 2%-a-year target. When energy prices return to normal and other countries stop devaluing their currencies, inflation will probably return to normal, but it's going to be a while.

Snail on a turtle | Khaled Nciri Photography/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:

No interest rate hike today, ladies and gentlemen, but you probably knew that. Rates are going to stay put at 0.25% to 0.5%. Feel free to relax. Put your feet up. Maybe catch up on "Game of Thrones."

Man sitting on Iron Throne from 'Game of Thrones' | Anadolu Agency/Getty Images

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:

So that rate increase we've been hinting at, to happen sometime this summer? If the numbers coming out of the economy don't improve, we may not see a rate increase this year, let alone this summer. And hey, we are watching the international stuff, OK? The next person who says the word "Brexit" around here gets to do all of next week's data releases. By themselves. With a slide rule.

Two rulers | Science & Society Picture Library/Getty Images

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 doing all the really boring stuff we do to keep long-term rates down so you can refinance your mortgage.


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; Esther L. George; Loretta J. Mester; Jerome H. Powell; Eric Rosengren; and Daniel K. Tarullo.

What the Fed meant:

Even Esther George didn't fight us on this one, which tells you we may be more worried about the state of the economy than we're letting on in this statement.

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