as well as by a negative contribution from inventory investment. although private domestic final demand appears to have slowed somewhat in the fourth quarter, it has continued to advance. household spending has been supported by steady job gains and solid growth in real disposable income – aided in part by the declines in oil prices. one area of particular strength has been purchases of cars and light trucks ; sales of these vehicles in 2015, reached their highest level ever. in the drilling and mining sector, lower oil prices have caused companies to slash jobs and sharply cut capital outlays, but in most other sectors, business investment rose over the second half of last year. and homebuilding activity has continued to move up, on balance, although the level of new construction remains well below the longer - run levels implied by demographic trends. financial conditions in the united states have recently become less supportive of growth, with declines in broad measures of equity prices, higher borrowing rates for riskier borrowers, and a further appreciation of the dollar. these developments, if they prove persistent, could weigh on the outlook for economic activity and the labor market, although declines in longerterm interest rates and oil prices provide some offset. still, ongoing employment gains and faster wage growth should support the growth of real incomes and therefore consumer bis central bankers ’ speeches spending, and global economic growth should pick up over time, supported by highly accommodative monetary policies abroad. against this backdrop, the committee expects that with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace in coming years and that labor market indicators will continue to strengthen. as is always the case, the economic outlook is uncertain. foreign economic developments, in particular, pose risks to u. s. economic growth. most notably, although recent economic indicators do not suggest a sharp slowdown in chinese growth, declines in the foreign exchange value of the renminbi have intensified uncertainty about china ’ s exchange rate policy and the prospects for its economy. this uncertainty led to increased volatility in global financial markets and, against the background of persistent weakness abroad, exacerbated concerns about the outlook for global growth. these growth concerns, along with strong supply conditions and high inventories, contributed to the recent fall in the prices of oil and other commodities. in turn, low commodity prices could trigger financial stresses in commodity - exporting economies, particularly in vulnerable emerging market economies, and for commodity - producing firms in many countries. should any of these

satisfied and decided to raise the target range for the federal funds rate 1 / 4 percentage point, to between 1 / 4 and 1 / 2 percent. bis central bankers ’ speeches this increase marked the end of a seven - year period during which the federal funds rate was held near zero. the committee did not adjust the target range in january. the decision in december to raise the federal funds rate reflected the committee ’ s assessment that, even after a modest reduction in policy accommodation, economic activity would continue to expand at a moderate pace and labor market indicators would continue to strengthen. although inflation was running below the committee ’ s longer - run objective, the fomc judged that much of the softness in inflation was attributable to transitory factors that are likely to abate over time, and that diminishing slack in labor and product markets would help move inflation toward 2 percent. in addition, the committee recognized that it takes time for monetary policy actions to affect economic conditions. if the fomc delayed the start of policy normalization for too long, it might have to tighten policy relatively abruptly in the future to keep the economy from overheating and inflation from significantly overshooting its objective. such an abrupt tightening could increase the risk of pushing the economy into recession. it is important to note that even after this increase, the stance of monetary policy remains accommodative. the fomc anticipates that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate. in addition, the committee expects that the federal funds rate is likely to remain, for some time, below the levels that are expected to prevail in the longer run. this expectation is consistent with the view that the neutral nominal federal funds rate – defined as the value of the federal funds rate that would be neither expansionary nor contractionary if the economy was operating near potential – is currently low by historical standards and is likely to rise only gradually over time. the low level of the neutral federal funds rate may be partially attributable to a range of persistent economic headwinds – such as limited access to credit for some borrowers, weak growth abroad, and a significant appreciation of the dollar – that have weighed on aggregate demand. of course, monetary policy is by no means on a preset course. the actual path of the federal funds rate will depend on what incoming data tell us about the economic outlook, and we will regularly reassess what level