Information received since the Federal Open Market Committee met in August indicates that the labor market has continued to strengthen and that economic activity has been rising at a strong rate. Job gains have been strong, on average, in recent months, and the unemployment rate has stayed low. Household spending and business fixed investment have grown strongly. On a 12-month basis, both overall inflation and inflation for items other than food and energy remain near 2 percent. Indicators of longer-term inflation expectations are little changed, on balance.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective over the medium term. Risks to the economic outlook appear roughly balanced.
In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 2 to 2-1/4 percent.
The Dot Plot, a measure of future rate projections, shows a near-term likelihood of another hike this year followed by increasing uncertainty.
One participant thinks the Fed is done hiking. Another thinks the Fed will hike to over 4.0% percent by 2021.
Judging from the plots, it appears at least some of the participants are penciling in a recession in 2021. I would be extremely surprised if we go that long.
Mike "Mish" Shedlock