The labor market tightened further during the second quarter with the unemployment rate declining to 4.3%. Inflation remains stubbornly below the Federal Reserve Open Market Committee’s (FOMC) 2% target, but a tightening labor market may eventually place upward pressure on wages. The FOMC increased its policy interest rate an additional 0.25% in June to a target of 1%-1.25%, and announced plans for additional interest rate increases. In addition, the FOMC disclosed its plan to reduce its securities portfolio acquired since the Great Recession. Portfolio balance to be unwound is in excess of $3 trillion.
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