The Federal Open Market Committee chose to forgo raising the federal funds rate in its latest July meeting as the market starts to recover from the initial impact of the U.K. choosing to leave the European Union.
To no ones surprise in the June meeting, the FOMC choose to keep the federal funds rate between 0.25% and 0.5%, which is the same level as when the Fed originally announced it would raise rates back in December.
From the FOMC’s press statement:
In light of the current shortfall of inflation from 2%, 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.
According to National Association of Federal Credit Unions Chief Economist Curt Long, “The tone of the statement was largely positive. The assessments of the economy in general and the labor market in particular were more upbeat, and the committee deemed that risks had diminished.”
“Nevertheless, there was no indication that the committee anticipates that inflation will pick up in the near term, which leaves them enough slack to maintain a cautious approach to normalizing rates,” continued Long.
The minutes from the FOMC’s June meeting showed that officials held off on raising mortgage rates in June due to the uncertainties surrounding the U.S. labor market and the financial stability that threatened their outlook, according to an article by Jeanna Smialek for Bloomberg.
At the time of the June meeting the U.K.’s decision to leave the European Union had yet to be decided, but it also kept the Fed from raising rates.
There are only three FOMC meeting left for the year: Sept. 20 to 21, Nov. 1 to 2 and Dec. 13 to 14.