half of last year, and industrial production has declined a bit, on balance, since the turn of the year. while these developments bear watching, some of this sluggishness seems to be the result of transitory factors, including unusually severe winter weather, labor disruptions at west coast ports, and statistical noise. the available data suggest a moderate pace of gdp growth in the second quarter as these influences dissipate. notably, consumer spending has picked up, and sales of motor vehicles in may and june were strong, suggesting that many households have both the wherewithal and the confidence to purchase big - ticket items. in addition, homebuilding has picked up somewhat lately, although the demand for housing is still being restrained by limited availability of mortgage loans to many potential homebuyers. business investment has been soft this year, partly reflecting the plunge in oil drilling. and net exports are being held down by weak economic growth in several of our major trading partners and the appreciation of the dollar. looking forward, prospects are favorable for further improvement in the u. s. labor market and the economy more broadly. low oil prices and ongoing employment gains should continue to bolster consumer spending, financial conditions generally remain supportive of growth, and the highly accommodative monetary policies abroad should work to strengthen bis central bankers ’ speeches global growth. in addition, some of the headwinds restraining economic growth, including the effects of dollar appreciation on net exports and the effect of lower oil prices on capital spending, should diminish over time. as a result, the fomc expects u. s. gdp growth to strengthen over the remainder of this year and the unemployment rate to decline gradually. as always, however, there are some uncertainties in the economic outlook. foreign developments, in particular, pose some risks to u. s. growth. most notably, although the recovery in the euro area appears to have gained a firmer footing, the situation in greece remains difficult. and china continues to grapple with the challenges posed by high debt, weak property markets, and volatile financial conditions. but economic growth abroad could also pick up more quickly than observers generally anticipate, providing additional support for u. s. economic activity. the u. s. economy also might snap back more quickly as the transitory influences holding down first - half growth fade and the boost to consumer spending from low oil prices shows through more definitively. as i noted earlier, inflation continues to run below the committee

’ s 2 percent objective, with the personal consumption expenditures ( pce ) price index up only 1 / 4 percent over the 12 months ending in may and the core index, which excludes the volatile food and energy components, up only 1 - 1 / 4 percent over the same period. to a significant extent, the recent low readings on total pce inflation reflect influences that are likely to be transitory, particularly the earlier steep declines in oil prices and in the prices of non - energy imported goods. indeed, energy prices appear to have stabilized recently. although monthly inflation readings have firmed lately, the 12 - month change in the pce price index is likely to remain near its recent low level in the near term. my colleagues and i continue to expect that as the effects of these transitory factors dissipate and as the labor market improves further, inflation will move gradually back toward our 2 percent objective over the medium term. market - based measures of inflation compensation remain low – although they have risen some from their levels earlier this year – and survey - based measures of longer - term inflation expectations have remained stable. the committee will continue to monitor inflation developments carefully. monetary policy regarding monetary policy, the fomc conducts policy to promote maximum employment and price stability, as required by our statutory mandate from the congress. given the economic situation that i just described, the committee has judged that a high degree of monetary policy accommodation remains appropriate. consistent with that assessment, we have continued to maintain the target range for the federal funds rate at 0 to 1 / 4 percent and have kept the federal reserve ’ s holdings of longer - term securities at their current elevated level to help maintain accommodative financial conditions. in its most recent statement, the fomc again noted that it judged it would be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term. the committee will determine the timing of the initial increase in the federal funds rate on a meeting - by - meeting basis, depending on its assessment of realized and expected progress toward its objectives of maximum employment and 2 percent inflation. if the economy evolves as we expect, economic conditions likely would make it appropriate at some point this year to raise the federal funds rate target, thereby beginning to normalize the stance of monetary policy. indeed, most participants in june projected that an increase in the federal funds target