With the aim of maximizing labor participation, maintaining inflation under control, and keeping the economy moving forward, the Federal Open Market Committee (FOMC) meets on a regular basis to discuss economic and monetary policy. On September 25 & 26, the Federal Reserve’s FOMC held its sixth scheduled meeting of 2018 and the last one before the midterm elections in November. After the two-day gathering, Federal Reserve Chair Jerome Powell announced that the FOMC had decided to raise its target for the Federal Funds rate by 0.25% to a range between 2.0% and 2.25%. This third increase of the year is due to the continued recovery and dynamism experienced by the national economy of the United States. Simultaneously, an overall higher interest rate is positive because it gives the FOMC more leverage and monetary policy options in case of an economic slowdown or a possible liquidity trap.

Economic Fundamentals and Ongoing Monetary Policy

During his press conference, Chair Powell reflected on the tenth anniversary of the global financial crisis, the economic recovery of the last several years, and how the banking industry has been reformed in order to prevent turmoil in the future. Moreover, the FOMC highlighted continued gains of 185.000 jobs a month in the national market during the last three months and a steadily low unemployment level as well as an increase in both household and business spending. Likewise, after remaining inconsistent and below target for several months and years, overall inflation has stabilized around its 2.0% long-term target, which is one of the policy mandates of the Federal Reserve.

The economy of the United States is expected to grow by approximately 3.1% during 2018 and 2.5% in 2019. Furthermore, if this positive economic trend continues, the FOMC estimates that the Federal Funds interest rate will reach 2.4% by the end of 2018, 3.1% by the end of 2019, and 3.4% by the end of 2020. Similarly, the FOMC expects the Real Gross Domestic Product growth (inflation adjusted GDP) of the United States to reach 2.8% in 2018, 2.4% during 2019, and 2.0% in 2020. In the case of the stock market, the Dow Jones Industrial Average (DJIA) has continued to grow, from 20.660 points on March 22, 2017 to 22.350 points on September 22, 2017 and approximately 26.478 points on September 26, 2018. The next FOMC meeting is scheduled for November 7 & 8, right after the midterm elections. Nevertheless, if the indications presented above remain stable, there might well be another increase of 0.25% in interest in either November or December.

Lastly, in terms of trade, the United States is the second largest export economy in the world (after China). During 2016, the country exported a total of US$1.32 trillion worth of goods and imported US$2.12 trillion, which resulted in a trade deficit of US$791 billion.

(Read more about World Habitat Day and Sustainable Development)

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