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FOMC introductory

The Federal Reserve's recent press conferences highlight its commitment to maximum employment and stable prices, with current economic conditions showing low unemployment and easing inflation above the 2% target. Monetary policy decisions include maintaining interest rates and a cautious approach to balance sheet reduction amid rising uncertainty from trade and other policies. The Fed's ongoing review of its monetary policy framework aims to ensure long-term inflation expectations remain anchored while balancing employment and inflation goals.

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12 views4 pages

FOMC introductory

The Federal Reserve's recent press conferences highlight its commitment to maximum employment and stable prices, with current economic conditions showing low unemployment and easing inflation above the 2% target. Monetary policy decisions include maintaining interest rates and a cautious approach to balance sheet reduction amid rising uncertainty from trade and other policies. The Fed's ongoing review of its monetary policy framework aims to ensure long-term inflation expectations remain anchored while balancing employment and inflation goals.

Uploaded by

Hong Nhung
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Press Conference May 7, 2025

Fed's Dual Mandate: Committed to maximum employment and stable prices.

Current Economic Conditions:

● Economy remains solid despite uncertainty.

● Unemployment is low (4.2%); labor market near maximum employment.

● Inflation has eased but is still above the 2% target.

Monetary Policy Decision:

● Interest rates left unchanged.

● Current stance seen as appropriate for timely economic response.

● Balance sheet reduction continues.

GDP and Spending:

● Q1 GDP dipped due to trade-related import timing.

● Private domestic final purchases (PDFP) grew 3%.

● Consumer spending slowed; business investment rebounded.

Sentiment and Uncertainty: Household and business confidence declined, mainly due to trade
policy concerns.

Labor Market:

● Average of 155K new jobs/month recently.

● Wage growth is moderating but still outpaces inflation.

● No significant inflationary pressure from the labor market.

Inflation and Expectations:

● Headline PCE inflation: 2.3%; Core PCE: 2.6%.

● Short-term inflation expectations rising, partly due to tariffs.

● Long-term expectations remain anchored at 2%.

Policy Risks:
● New policies (trade, immigration, fiscal, regulation) create uncertainty.

● Sustained tariffs could lead to higher inflation, lower growth, and rising unemployment.

Fed's Response Strategy:

● Aims to keep long-term inflation expectations anchored.

● Will balance employment and inflation goals if in conflict.

● Currently waiting for more clarity before adjusting policy.

Monetary Policy Framework Review:

● Ongoing 5-year review includes inflation dynamics.

● Involves public outreach (e.g., Fed Listens events).

● Completion expected by late summer.

Closing Message:

● Fed is committed to achieving its goals for the benefit of all Americans.

● Acknowledges the broad impact of its actions on communities and families.

Press Conference March 19, 2025

Fed’s Dual Mandate and Economic Outlook

● Fed remains focused on achieving maximum employment and stable prices.

● The economy is strong and has made significant progress over the past two years.

● Labor market is solid; inflation has moved closer to 2% but remains somewhat elevated.

Monetary Policy Decisions

● Federal funds rate kept unchanged at 4.25% to 4.5%.

● Decision made to slow the pace of balance sheet reduction (Treasury redemption cap
reduced from $25B to $5B/month).

● Balance sheet action has no impact on the policy stance in the medium term.

Economic Activity and Outlook


● Q4 2024 GDP grew 2.3%.

● Consumer spending is moderating after strong growth in late 2024.

● Business and household surveys show rising uncertainty.

● 2025 GDP projection: 1.7% (lower than December), slightly under 2% in following
years.

Labor Market

● Average of 200,000 jobs/month in recent months.

● Unemployment rate at 4.1%, stable.

● Wage growth outpaces inflation but at a sustainable pace.

● Labor market is balanced and not a major source of inflation.

● SEP projection: unemployment at 4.4% in 2025, 4.3% in 2026–2027.

Inflation and Expectations

● Inflation has eased but remains above 2% target.

● PCE inflation (Feb 2025): Headline: 2.5%; Core: 2.8%

● Short-term inflation expectations have ticked up, driven partly by tariffs.

● Long-term expectations still aligned with 2% goal.

● SEP projections:

○ 2025: 2.7%,

○ 2026: 2.2%,

○ 2027: 2.0% (target).

Outlook for Policy Adjustments

● Policy will be data-driven, based on economic outlook and risk balance.

● Fed is not in a rush to adjust rates and prefers to wait for clarity.

● If the economy remains strong with sticky inflation → policy restraint may continue.

● If labor weakens or inflation falls faster → policy may ease.


Uncertainty and External Policy Factors

● High uncertainty due to policy shifts in: Trade, Immigration, Fiscal policy, Regulation

● Net impact of these changes on monetary policy is still unclear.

Fed’s Balance Sheet Policy

● Balance sheet has shrunk by over $2 trillion.

● Some signs of tightness in money markets prompted reduction in pace of runoff.

● Agency securities cap unchanged.

Monetary Policy Framework Review

● Part of Fed’s five-year strategic review.

● This meeting focused on labor market dynamics and employment goals.

● Will include Fed Listens events, research conference in May, and public input.

● Review expected to conclude by late summer.

Closing Message

● Fed remains committed to:

○ Maximum employment

○ Sustainable 2% inflation

○ Anchored long-term expectations

● All actions are taken with the public interest in mind, affecting families and businesses
nationwide.

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