Information received since the Federal Open Market Committee met in December confirms that economic activity is expanding at a moderate pace. Inflation has continued to run below the Committee’s longer-run objective, primarily reflecting declines in energy prices. The decline in energy prices appears to be principally a consequence of improving technology in oil and natural gas production and is, thus, a change in relative prices that has no long-term implications for the aggregate rate of inflation.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. To support continued progress toward these goals, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate.
To minimize uncertainty over the course of policy, the Committee judges that the process of normalizing interest rates should begin in June. However, the exact timing is data dependent and might be adjusted as necessary.
The Committee also judges that it is now appropriate to begin the process of normalizing its open market portfolio. Effective immediately, the Federal Reserve will cease to reinvest interest on the portfolio and maturing principal.
This statement does away with statement bloat—the profusion of meaningless sentences and phrases that have made the FOMC statement increasingly long, obscure and difficult to interpret over the past few years. Every word in the statement ought to convey useful information to the markets.