Following the US Central Bank 2-day meeting to discuss the US economy and interest rates, the outcome is flat with no interest rate increase for now. The US Dollar has now reached an all time high with successful short trading before the announcement. In her statement, Federal Reserve Chair Janet Yellen, gave the green light for the US economy. Highlights of the statement are as follows:
INTEREST RATE PATH
"I would say there is relatively little upward movement in the (federal funds rate) path, and I would view it as broadly in line with what one would expect with a very small downward reduction in the path for unemployment and a very slight upward change in the projection for inflation.
"So most participants in deciding on the path ... look at, as our guidance says, how large is the gap between performance of the labor market and that associated with our maximum employment objective, how large is the gap between inflation and our 2 percent objective, how fast will those gaps change.
"And you see in the projections very modest reductions in the size of those gaps, and modest ... very small change of a slightly faster pace at which those gaps would change. I would describe the change in the projections both for the economy and the path of rates as quite modest."
ECONOMIC DATA AND 'CONSIDERABLE TIME'
"The outlook hasn’t changed that much from June, and the committee felt comfortable with this characterization ...
I want to emphasize that there is no mechanical interpretation for what the term 'considerable time' means. As I've said repeatedly, the decisions that the committee makes about what is the appropriate time to begin to raise its target for the federal funds rate will be data-dependent ...
If the pace of progress in achieving our goals were to quicken, if it were to accelerate, it is likely the committee would begin raising its target for the federal funds rate sooner than is now anticipated, and might then raise the federal funds rate at a faster rate. And the opposite is also true, if the projections were to change ....
I think it would not be accurate to describe the committee's guidance about the timing of the federal funds rate and when it will move above zero as being calendar-based ... I know 'considerable time' sounds like it's a calendar-concept but it is highly conditional and it's linked to the committee's assessment of the economy."
FOMC RATE PROJECTIONS
"Although FOMC participants provide a number of explanations for the federal funds rate running below its longer run normal level at (the end of 2016), many cite the residual effects of the financial crisis, which although slowly diminishing, are likely to continue to restrain household spending, constrain credit availability and depress expectations for future growth and output and incomes.
"As these factors dissipate further most participants expect the federal funds rate to move close to its longer run normal level by the end of 2017. Let me reiterate, however, that the committee's expectations for the path of the federal funds rate are contingent on the economic outlook."
ON PART-TIME WORKERS
"There are still too many people who want jobs but cannot find them. Too many who are working part time but would prefer full time work. And too many who are not searching for a job but would be if the labor market was stronger. As noted in the FOMC (Federal Open Market Committee) statement, a range of labor market indicators suggests that there remains significant underutilization of labor resources. The committee continues to see sufficient underlying strength in the economy to support ongoing improvement in the labor market.
Indicators of spending and production for the third quarter suggest that economic activity is expanding at a moderate pace, and the committee continues to expect a moderate pace of growth going forward."
FED FUNDS RATE RANGE
"The FOMC now anticipates that it will continue to establish a target range, rather than a single point, for the federal funds rate when normalization begins. The dots ... now show for each participant the midpoint for this target range."