The Fed's statement on November 01, 2017. FRS Comment on the Base Interest Rate Decision

The Fed's statement on November 01, 2017. FRS comment on the base interest rate decision

Maintaining the base interest rate in the target range of 1.00% -1.25%, the Federal Open Market Committee (FOMC) of the US Federal Reserve commented on its decision and the current situation in the country.

The Fed noted a significant increase in the economic activity, despite the hurricanes that caused destructions, the situation in the labor market continued to improve due to consistent reduction in unemployment, even in the face of declining employment in September brought by the subsequent storms.

The Fed stated that during the period between the commission meetings, family expenses showed moderate expansion, and the investment growth by business structures has increased significantly in the recent quarters.

The Fed continues to assess long-term inflation expectations as stable. At the same time, the total inflation and basic inflation is calculated on a 12-month basis, which does not include energy and food prices, decreased this year and remained below 2%. The rise in gasoline prices, after the impact of hurricanes. But the basic inflation remained at the same level. Compensatory has the same impact on inflation from the markets and continues to be implemented in a small extent.

In compliance with its authority, the Fed seeks to promote maximum employment and price stability. The damage and restoration of works by hurricanes will affect economic activity, employment and inflation in the near future, but previous experiences shows that the impact of economic growth in the medium term. Therefore, the Fed still expects that the gradual regulation of the monetary policy will expand economic activity at a moderate pace and further strengthen the labor market. Annual inflation is expected to remain slightly below 2% in the near future, but should stabilize near the Fed's target level of 2% in the medium term. Short-term risks for the economic outlook look fairly balanced, but the Fed will continue to closely monitor inflation.

Considering the previously achieved and expected parameters of the labor market and inflation, the Federal Reserve decided to keep the range of federal funds target rate at 1.00% -1.25%. The basic principles of monetary policy will remain flexible enough, providing support for improvement of labor market conditions and a steady return of inflation level towards 2%.

In determining the timing and scope of future regulation for the range of federal funds target, the Fed will be guided by both achieved and expected progress in moving towards long-term goals of maximum employment and inflation at 2%. This approach will be based on a wide range of information, including parameters of labor market conditions, indicators of inflationary pressures and inflation expectations, financial and international events. The Fed will closely monitor the actual and expected inflation processes in relation to its symmetric target inflation rate. The Fed expects that economic conditions will develop a way for ensuring a smooth increase in the interest rate for federal funds and it will probably remain for some time below the levels that are expected to prevail over the long term. However, the actual interest rate trajectory for federal funds will depend on economic trends in accordance with the incoming data.

The program for normalizing the balance of the Fed, which started in October 2017, continues to be implemented.

The current fundamentals of monetary policy were adopted unanimously by 9 members of the Federal Open Market Committee of the US Federal Reserve.

* The presented market analysis is informative and does not constitute a guide to the transaction.

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