Federal Reserve — FOMC Statement (USA, 2025)

FOMC Minutes of the Federal Open Market Committee January 28 29, 2025 F E D E R A L R E S E R V E S Y S T E M Minutes of the Federal Open Market Committee January 28 29, 2025 A joint meeting of the Federal Open Market Committee and the Board of Governors of the Federal Reserve System was held in the offices of the Board of Governors on January 28, 2025, at 8:30 a.m. and continued on Wednesday, January 29, 2025, at 9:00 a.m.1 Annual Organizational Matters2 The agenda for this meeting reported that advices of the election of the following members and alternate members of the Federal Open Market Committee for a term beginning January 28, 2025, were received and that these individuals executed their oaths of office. The elected members and alternate members were as follows: John C. Williams, President of the Federal Reserve Bank of New York, with Sushmita Shukla, First Vice President of the Federal Reserve Bank of New York, as alternate; Susan M. Collins, President of the Federal Reserve Bank of Boston, with Patrick Harker, President of the Federal Reserve Bank of Philadelphia, as alternate; Austan D. Goolsbee, President of the Federal Reserve Bank of Chicago, with Beth M. Hammack, President of the Federal Reserve Bank of Cleveland, as alternate; Alberto G. Musalem, President of the Federal Reserve Bank of St. Louis, with Lorie K. Logan, President of the Federal Reserve Bank of Dallas, as alternate; Jeffrey R. Schmid, President of the Federal Reserve Bank of Kansas City, with Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, as alternate; 1 The Federal Open Market Committee is referenced as the  FOMC  and the  Committee  in these minutes; the Board of Governors of the Federal Reserve System is referenced as the  Board  in these minutes. 2 Committee organizational documents are available at www.federalreserve.gov/monetarypolicy/rules_authorizations.htm. 2 January 28 29, 2025 By unanimous vote, the following officers of the Committee were selected to serve until the selection of their successors at the first regularly scheduled meeting of the Committee in 2026: Jerome H. Powell Chair John C. Williams Vice Chair Joshua Gallin Secretary Matthew M. Luecke Deputy Secretary Brian J. Bonis Assistant Secretary Michelle A. Smith Assistant Secretary Mark E. Van Der Weide General Counsel Richard Ostrander Deputy General Counsel Reena Sahni Assistant General Counsel Trevor A. Reeve Economist Stacey Tevlin Economist Beth Anne Wilson Economist Shaghil Ahmed Kartik B. Athreya James A. Clouse Brian M. Doyle Eric M. Engen Carlos Garriga Joseph W. Gruber Anna Paulson William Wascher Egon Zakraj ek Associate Economists By unanimous vote, the Committee selected the Federal Reserve Bank of New York to execute transactions for the System Open Market Account (SOMA). By unanimous vote, the Committee selected Roberto Perli and Julie Ann Remache to serve at the pleasure of the Committee as manager and deputy manager of the SOMA, respectively, on the understanding that these selections were subject to being satisfactory to the Federal Reserve Bank of New York. Secretary s note: The Federal Reserve Bank of New York subsequently sent advice that the selections indicated previously were satisfactory. Minutes of the Federal Open Market Committee 3 By unanimous vote, the Committee voted to reaffirm without revision the FOMC Authorizations and Continuing Directives for Open Market Operations. All participants indicated support for, and agreed to abide by, the FOMC Policy on Investment and Trading for Committee Participants and Federal Reserve System Staff, the Program for Security of FOMC Information, the FOMC Policy on External Communications of Committee Participants, and the FOMC Policy on External Communications of Federal Reserve System Staff. The Committee voted unanimously to approve those four policies.2 Review of Monetary Policy Strategy, Tools, and Communications Committee participants began discussions related to their review of the Federal Reserve s monetary policy framework. This review is focused on two specific areas: the Committee s Statement on Longer-Run Goals and Monetary Policy Strategy, which presents the Committee s approach to the conduct of monetary policy, and the Committee s policy communication practices. The Committee s 2 percent longer-run inflation goal will be retained and is not a focus of the review. In support of these discussions, staff briefings provided a retrospective on the Committee s 2019 20 framework review and summarized the experience abroad in conducting reviews of monetary policy frameworks. The staff presentation began by recapping the creation and evolution of the Committee s Statement on Longer-Run Goals and Monetary Policy Strategy and the context of the Committee s 2019 20 review. The adoption of the statement in 2012 introduced the Committee s 2 percent inflation target and codified long-standing practices followed by the Committee and, as such, was an important step in improving the transparency, accountability, and predictability of U.S. monetary policymaking. The launch of the 2019 20 review was motivated in part by a desire to evaluate the experience of the Global Financial Crisis and its aftermath. During this period, inflation had run persistently below the Committee s 2 percent objective, even as the unemployment rate and interest rates remained low. These developments indicated a greater risk that the federal funds rate would be constrained by its effective lower bound (ELB) more often in the future, posing challenges to the achievement of the Committee s dual-mandate goals over the medium term. The staff summarized the scope and components of the 2019 20 review, including its outreach to a broad range of individuals and groups, and the rationale behind the changes made to the statement at the end of the review. In summarizing the international experience, the staff noted that occasional reviews of monetary policy frameworks were seen as useful in adapting to evolving economic environments, promoting transparency, and fostering public understanding and, therefore, were becoming the norm in advanced economies. Reviews abroad had covered various aspects related to monetary policy goals, 4 January 28 29, 2025 strategies, tools, communications, forecasting, and governance, with some of the recent reviews giving particular attention to topics such as the experience of the COVID 19 pandemic, the ensuing global inflation episode, and the conduct and communication of monetary policy in times of unusual uncertainty. Participants viewed the statement as having played an important role in building a common understanding among policymakers of the congressionally mandated monetary policy goals and of their monetary policy strategy. The statement and other means of policy communication also figured importantly in conveying that understanding to the public and helping to anchor inflation expectations, thereby supporting the effective transmission of monetary policy. Participants indicated that they were looking forward to their discussions at upcoming meetings and to hearing a range of perspectives at various Fed Listens events as well as at a planned research conference, and that they were approaching the review with open minds. Participants noted that the economic consequences of the COVID 19 pandemic were largely unforeseen at the time of the 2019 20 review and that the current economic environment differed greatly from the period leading up to that review, which was characterized in part by persistently low inflation and interest rates. In light of the experience of the past five years, participants assessed that it was important to consider potential revisions to the statement, with particular attention to some of the elements introduced in 2020. Participants highlighted as areas of consideration the statement s focus on the risks to the economy posed by the ELB, the approach of mitigating shortfalls from maximum employment, and the approach of aiming to achieve inflation moderately above 2 percent following periods of persistently below-target inflation. Participants emphasized the need for the FOMC s monetary policy framework to be robust to a wide range of economic circumstances. They noted that economic uncertainty including about the values of the longer-run neutral policy rate, the economy s potential growth rate, and the level of maximum employment would remain an important factor affecting their decisionmaking. Participants also mentioned aspects of the statement that they thought should continue to be emphasized including the Committee s firm commitment to achieving maximum employment and 2 percent inflation, as well as the importance of keeping longer-term inflation expectations well anchored. Participants expected that their discussions related to the framework review would continue at upcoming meetings. They expected the review to wrap up by late summer and intended to report the outcomes of the review to the public. Developments in Financial Markets and Open Market Operations The manager turned first to a review of developments in financial markets. Over the intermeeting period, broad equity price indexes had declined moderately, credit spreads had remained very tight, Minutes of the Federal Open Market Committee 5 and the trade-weighted value of the dollar had risen slightly. In considering the expected path of the federal funds rate, the manager noted that the modal policy rate path implied by options prices had not changed appreciably on net over the intermeeting period and was broadl