“To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate,” the FOMC said. “Based on its current assessment, the Committee judges that it can be patient in beginning to normalize the stance of monetary policy.”
In determining how long the Fed will maintain this target, it will assess measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments, the FOMC said.
Inflation has declined further below the Committee’s longer-run objective, largely reflecting declines in energy prices, although the Committee still expects inflation to rise gradually to 2% over the medium term.
On December 17, the Federal Reserve also maintained its 0 to 1/4 interest rate target, while indicating that it expected inflation to rise gradually toward 2 percent, as the labor market improved and the transitory impact of low energy prices dissipated. The Committee then also emphasized taking a “patient” approach towards monetary policy. However, last month’s decision sparked debate within the policy board, with one side advocating for a prolonged period of ultra-low borrowing costs while the other warned that prolonged stimulus in the accelerating economy may cause bubbles, increased instability and volatility.
The Federal Reserve, also referred to as The Fed, is the central bank of the United States that is responsible for national monetary policy, setting interest rates and regulating banks. The Federal Open Market Committee (FOMC) is specifically charged under law to oversee market operations, the main tool used to influence overall monetary and credit conditions, including meeting regularly to establish interest rates.
