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The U.S. economy added 155,000 jobs in November, after a gain of 237,000 in October. Job growth has averaged 206,000 per month so far in 2018, up from 182,000 per month in 2017.
As expected, the Federal Open Market Committee raised the federal funds rate by one-quarter of a percentage point on December 19, to a range of 2.25 to 2.50 percent. The decision was unanimous. This was the fourth increase this year (every other FOMC meeting).
The FOMC has been gradually raising the fed funds rate from a near-zero level since late 2015.
In its forward-looking section, the FOMC statement said that “the Committee judges that some further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective over the medium term.”
The addition of the word “some” to the statement in December suggests that while the FOMC expects to continue raising the rate fed funds rate in 2019, it may be approaching the end of its tightening cycle. The language on current economic conditions was unchanged from the previous statement, on November 8, and was quite positive, despite recent stock market volatility.
Oil prices are falling at the end of 2018, down to around $45 for a barrel of West Texas Intermediate crude, from $76 in early October. Increased U.S. production in response to higher prices earlier this year, slightly slower global economic growth, and the decision by the Trump administration to grant waivers to major importers of Iranian oil have all pushed down oil prices.
The big drop in oil prices will slow inflation in late 2018 and early 2019, giving the FOMC more leeway to keep interest rates low and support economic growth.
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