The Federal Reserve will begin unwinding its $4.5 trillion asset stockpile in October, and members still expect to hike rates one more time this year, according to the statement released at the conclusion of the two-day Federal Open Market Committee (FOMC) meeting. But for now, they left the benchmark interest rate unchanged at 1.00% to 1.25%. These decisions were unanimous.
While Hurricanes Harvey, Irma and Maria certainly will certainly affect economic activity in the near-term, “past experience suggests that the storms are unlikely to materially alter the course of the national economy over the medium term,” according to the statement.
Therefore, the FOMC still expects steady growth and low unemployment to push inflation closer to their 2% goal over the medium term. (Concerns about stubbornly low inflation do appear to be rising, however.) This, in turn, would allow them to gradually tighten monetary policy by raising interest rates and reversing the quantitative easing.
Fed officials again indicated they plan to raise interest rates gradually, but their updated projections signal the pace of doing so may be slower than previously signaled. Three quarter-point rate hikes will likely be warranted next year, based on the median of the dot plot of their latest interest rate forecasts.
The Fed’s balance sheet will be unwound gradually, starting at just $10 billion a month. That figure will rise every three months until $50 billion is being peeled off per month.
