Over the first half of the year, monetary policy remained accommodative to support further
improvement in labor market conditions and a return to 2 percent inflation. In particular, the
Federal Open Market Committee (FOMC) maintained the target range for the federal funds rate at
¼ to ½ percent. This unchanged policy stance was supported, among other factors, by the FOMC’s
assessments in the first months of the year that global economic and financial developments posed
risks to the economic outlook, and in June that recent information indicated that the pace of
improvement in the labor market had slowed. In addition, the Committee’s policy stance reflected
its expectation that inflation would remain low in the near term. Looking ahead, the FOMC
expects that economic conditions will warrant only gradual increases in the federal funds rate. In
determining future adjustments to the federal funds rate, the Committee will take into account a
wide range of information, including measures of labor market conditions, indicators of inflation
pressures and inflation expectations, and readings on financial and international developments.