FOMC announcement 27.04.2016

27 abril 2016, 18:55
Anderson de Carvalho Manilha Braga

Recent History Of This Indicator
The Federal funds rate target is expected to remain unchanged at a midpoint of 0.375 percent between a range 0.25 to 0.50 percent, where it was set at the December FOMC. Though some FOMC members had been vocal in the possibility of an April rate hike, dovish comments from Janet Yellen, who is urging caution, as well as a run of soft economic data, specifically consumer data, have wiped out any chance for a move at this meeting. Continued concern over the global economy as well as lack of inflation pressures are likely themes for the statement which may, nevertheless, still underscore the possibility of a rate hike at the June FOMC.

The Federal Open Market Committee (FOMC) is the policy-making arm of the Federal Reserve. It determines short-term interest rates in the U.S. when it decides the overnight rate that banks pay each other for borrowing reserves when a bank has a shortfall in required reserves. This rate is the fed funds rate. The FOMC also determines whether the Fed should add or subtract liquidity in credit markets separately from that related to changes in the fed funds rate. The Fed announces its policy decision (typically whether to change the fed funds target rate) at the end of each FOMC meeting. This is the FOMC announcement. The announcement also includes brief comments on the FOMC's views on the economy and how many FOMC members voted for and how many voted against the policy decision. Since the last recession, the statement also includes information on Fed purchases of assets, so-called "quantitative easing", which affects longer-term interest rates. Also, a key part of the announcement is guidance on potential changes in policy rates or asset purchases. 

The Fed closely monitors the core PCE price index to indicate whether or not policy is approximately correct, overly accommodative, or too restrictive. The PCE price index is preferred to the CPI because it is more closely aligned to the cost of living than the CPI (which measures a fixed basket of goods & services.) This chart covers monthly data and the fed funds target rate reflects the monthly average. As such, it will not correspond to the most recent fed funds rate target announced by the Fed. 
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