MBS Live Commentary: Differences Between Previous and Current FOMC Statements

Information received since the Federal Open Market Committee met in MarchMay indicates that the labor market remains strong and that economic activity roseis rising at a solidmoderate rate. Job gains have been solid, on average, in recent months, and the unemployment rate has remained low. GrowthAlthough growth of household spending andappears businessto fixedhave investmentpicked slowedup from earlier in the firstyear, quarterindicators of business fixed investment have been soft. On a 12-month basis, overall inflation and inflation for items other than food and energy have declined and are running below 2 percent. On balance, marketMarket-based measures of inflation compensation have remaineddeclined; low in recent months, and survey-based measures of longer-term inflation expectations are little changed.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. In support of these goals, the Committee decided to maintain the target range for the federal funds rate at 2-1/4 to 2-1/2 percent. The Committee continues to view sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective as the most likely outcomes, but uncertainties about this outlook have increased. In light of globalthese economicuncertainties and financial developments and muted inflation pressures, the Committee will beclosely patientmonitor asthe itimplications determinesof whatincoming futureinformation adjustmentsfor the economic outlook and will act as appropriate to sustain the targetexpansion, rangewith fora thestrong federallabor fundsmarket rateand mayinflation benear appropriateits tosymmetric support2 thesepercent outcomesobjective.

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 maximum employment objective and its symmetric 2 percent inflation objective. 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.