FOMC raised federal funds rate to 1.75-2.00% as widely expected. Statement below.

Federal Reserve Issues FOMC Statement

Information received since the Federal Open Market Committee met in May indicates that the labor market has continued to strengthen and that economic activity has been rising at a solid rate. Job gains have been strong, on average, in recent months, and the unemployment rate has declined. Recent data suggest that growth of household spending has picked up, while business fixed investment has continued to grow strongly. On a 12-month basis, both overall inflation and inflation for items other than food and energy have moved close to 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 1-3/4 to 2 percent. The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.

Voting for the FOMC monetary policy action were Jerome H. Powell, Chairman; William C. Dudley, Vice Chairman; Thomas I. Barkin; Raphael W. Bostic; Lael Brainard; Loretta J. Mester; Randal K. Quarles; and John C. Williams.

San Francisco Fed President Mary Daly said yesterday that ” an expeditious march to neutral by the end of the year as a prudent path.” And it’s the “top priority” to move “purposefully to a more neutral stance that does not stimulate the economy”

“The case for a 50 basis-point adjustment is now complete,” she said after the speech. “The economy is resilient; it can handle these adjustments.” And, she’s “busy thinking about are three things: inflation, inflation, inflation.”

Nevertheless she also emphasized, ,”if we ease on the brakes by methodically removing accommodation and regularly assessing how much more is needed, we have a good chance of transitioning smoothly and gliding the economy to its long-run sustainable path,” she said.

As for the economy, she said, recession is one word, but it describes a whole range of outcomes. It can be a couple of quarters of a tiny bit below zero. That’s a very different beast than something like the financial crisis or the Volcker disinflation period.”

“That’s not something that I’m forecasting or something I think would derail the long-run expansion,” she added.