FMOC: Interest Rates Unchanged, Forecasts Show No Change in 2020

Chairman Powell’s Press Conference:

The record-long US economic expansion is in its 11th year, a Bull run that has driven unemployment to the lowest level since Y 1969 even while failing to sustainably deliver inflation at the Fed’s 2% target.

Officials also released new Quarterly forecasts showing the following::

• The median estimate for the fed funds rate was at 1.6% at the end of 2020, 1.9% in 2021 and 2.1% in 2022. 13 officials expect rates to stay on hold next year, while 4 see a hike as appropriate.
• The jobless rate is expected to be 3.5% by late 2020, the same as it is now. The long-run unemployment rate was seen at 4.1%, down from 4.2% in the September forecast.
• Economic growth was seen at 2% in 2020 and 1.9% in 2021, both unchanged from the last estimates.
• Inflation is seen hitting 2% in 2021, unchanged from the prior projection.

Chairman Powell marks his 2nd anniversary as Fed chairman in February. He has endured a barrage of attacks from President Trump, who picked him for the job but has labeled Fed policies “ridiculous’’ and “pathetic’’ and called for steeper rate cuts.

Now, after decisively loosening monetary policy following rate hikes in Y 2018, Chairman Powell may be able to pull off a soft landing.

While factory gauges suggest that segment of the economy is in a slump, Fed officials say they are counting on consumer spending to keep the expansion going.

Wages are rising faster than inflation, and employers continue to add jobs with NFPs rising 266,000 in November. Economists surveyed expect growth to cool next year but remain near to the long-run trend.

The Fed’s rate cuts have also eased borrowing costs and pushed stock prices to record highs, which may support greater spending by boosting wealth and lifting confidence.

Stay tuned…

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