Federal Reserve Announces Steady Interest Rates, No Policy Changes in 2020

December 19, 2019

At the end of 2019, a year in which the U.S. central bank lowered its benchmark interest rate three times, the Federal Reserve has announced its decision to hold rates steady for the near future.

Following a meeting in early December, the Federal Open Market Committee elected to keep the funds rate in its target range of 1.5-1.75%

The Committee explained that it has no intention of changing monetary policy in the coming year, although officials will continue to keep an eye on changing market conditions.

This decision was reportedly unanimous, officials having resolved the dissents that were raised in earlier meetings.

In a statement released after the meeting, the Federal Reserve stated that “the Committee judges that the current stance of monetary policy is appropriate to support sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective.”

Recent statements from the chairman of the Federal Reserve, Jerome Powell, have echoed this optimistic language. 

Powell and his colleagues have repeatedly stated that the current monetary policy is unlikely to change while current market trends continue.

In September of this year, the Committee met to discuss projections for 2020.

A “dot plot” charting individual members’ predictions showed that they remain divided on what we might expect next year; while eight members didn’t predict any changes to the funds rate, nine stated that they projected at least one increase.

Another member predicted three consecutive rises. The average estimated result now predicts at least one hike to the 2020 rate.

December’s meeting yielded very different results, as only four members of the Committee predicted an upward hike in 2020. 

At the same time, members projected a positive end to 2019 with a 2.2% gain in gross domestic product.

Further, their expectations of inflation also lowered to 1.6%, down from a prediction of 1.8% in September.

In spite of this, inflation has remained below 2%, the benchmark that the Federal Reserve considers ideal for the economy.

Although Committee members have discussed multiple strategies to rectify the gap, the statement released after this month’s meeting indicates that we will not be seeing any changes to monetary policy any time soon.

Sincerely,

Doc Wellington

Retirement Insider