FOMC raises federal funds rate by 25bps to 5.25-5.50% as widely expected, by unanimous vote. The accompanying statement is like a carbon copy for the June’s one. The one exception is:

“The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. In support of these goals, the Committee decided to raise the target range for the federal funds rate to 5-1/4 to 5-1/2 percent.”

Fed will continue to “continue to assess additional information and its implications for monetary policy.”

Full statement below:

Recent indicators suggest that economic activity has been expanding at a moderate pace. Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated.

The U.S. banking system is sound and resilient. Tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation. The extent of these effects remains uncertain. The Committee remains highly attentive to inflation risks.

The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. In support of these goals, the Committee decided to raise the target range for the federal funds rate to 5-1/4 to 5-1/2 percent. The Committee will continue to assess additional information and its implications for monetary policy. In determining the extent of additional policy firming that may be appropriate to return inflation to 2 percent over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in its previously announced plans. The Committee is strongly committed to returning inflation to its 2 percent objective.

In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michael S. Barr; Michelle W. Bowman; Lisa D. Cook; Austan D. Goolsbee; Patrick Harker; Philip N. Jefferson; Neel Kashkari; Lorie K. Logan; and Christopher J. Waller.

Minneapolis Fed President Neel Kashkari said on Sunday, economic recovery will likely to be “slow” and “gradual”. “The virus continues to spread. And when we look around the world, there is evidence that when countries relax their economic controls, the virus tends to flare back up again,” he said. “The longer this goes on, unfortunately, the more gradual the recovery is likely to be.”

A robust recovery “would require a breakthrough in vaccines, a breakthrough in widespread testing, a breakthrough in therapies to give all of us confidence that it is safe to go back.” He expected the coronavirus pandemic to go on in phases for the next year or two.

He also warned, “the worst is yet to come on the job front, unfortunately,” referring to the historic job data released last week. “It’s really around 23, 24% of people who are out of work today,” he added. “Congress is going to need to continue to give assistance to workers who’ve lost their jobs,” he said.