The Federal Open Market Committee (FOMC) on March 21, 2018, raised its benchmark interest rate by a quarter-percentage point in the first policy meeting led by Chairman Jerome Powell. The committee also issued a monetary policy statement with revised language and announced an increase in the frequency of public press conferences.
The committee’s decision set the new target for the federal funds rate to a range of 1.5% to 1.75%. The move was widely anticipated by financial markets and was the sixth such increase since the central bank began tightening its monetary policy in 2015.
In the statement released after the two-day meeting, the FOMC provided an updated assessment of the U.S. economy. “The economic outlook has strengthened in recent months,” the statement read, citing recent data on employment, household spending, and business fixed investment. The committee noted that inflation remained below its 2% objective but was expected to move up in the coming months.
The structure and wording of the policy statement differed from those issued under Powell’s predecessor, Janet Yellen. The text was more concise, and some recurring phrases used in previous statements to describe the Fed’s policy stance were omitted or adjusted. Economic analysts noted that the changes aimed for more direct communication.
Alongside the rate decision, the Federal Reserve released its quarterly summary of economic projections. Officials revised their forecast for GDP growth upward for 2018 and 2019. The median projection from the committee’s “dot plot,” a chart showing individual members’ rate expectations, indicated that most officials anticipated at least two more rate increases for the remainder of 2018.
During a press conference following the meeting, Chairman Powell announced a significant change to the Fed’s public communications. He stated that beginning in January 2019, he would hold a press conference after every scheduled FOMC meeting, a total of eight per year. This doubles the previous schedule of four annual press conferences, which were held on a quarterly basis by former chairs Ben Bernanke and Janet Yellen.
Powell said the change was intended to improve communication and make every meeting a “live” one, meaning a policy change could be announced at any of the eight annual meetings. He stated the goal was to “explain our actions and to answer your questions.”
