According to the latest press release by the Federal Open Market Committee, or FOMC, the US unemployment rate remains low while labor market conditions remain solid. However, inflation remains elevated, which is why the majority of FOMC committee voted to maintain the target range for the federal funds rate from 4-1/4 to 4-1/2 percent. The FOMC consists the chair of the Federal Reserve System (the Fed), the seven members of the board of governors, along with presidents of five other regional federal reserve banks. This committee, which is currently chaired by Jerome H. Powell, decides the course of monetary policy for the country. When inflation is elevated, it pursues a contractionary monetary policy aimed at keeping interest rates relatively high. If unemployment is the major concern of the committee, they will instead reduce interest rates using expansionary monetary policies.

In their most recent press release, the FOMC states that they remain fully dedicated to achieving their long-run dual mandate of maximum employment and inflation at a rate of 2 percent.  In addition, they conclude that “the unemployment rate remains low, and labor market conditions remain solid. Inflation remains somewhat elevated.” However, they do note that swings in net exports, largely due to tariffs, continue to affect the data. Other recent economic indicators suggest that economic growth moderated in the first half of the year. Uncertainty remains regarding the overall economic outlook, but the committee will continue to monitor incoming information such as reading labor market conditions, inflation pressures and inflation expectations, along with financial and international developments and adjust as needed to attain the committee’s goals. 

Discussion Questions:

  1. What is the main responsibility of the Federal Open Market Committee (FOMC), and who serves as members of this Committee.
  2. Discuss how uncertainty about the overall economic outlook might have influenced the FOMC to leave interest rates unchanged. What does this latest decision say about how they are currently balancing their dual mandate?