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Fed cuts rates for 3rd time in 2019
The Federal Open Market Committee (FOMC), as expected, cut interest rates by 25 basis points Wednesday at the conclusion of its two-day monetary-policy setting meeting. The federal funds target rate is now set at a range of 1.5 to 1.75 percent.
"The Fed's decision to cut rates has little to do with the real economy, and will be pitched as a nod to rising risks associated with the trade war and slowing growth abroad," said NAFCU Chief Economist and Vice President of Research Curt Long. "The risk of unsettling financial markets, which had already priced in a rate cut, was also a factor.
"Markets are doubting a rate cut in December, and in dropping the language associated to supporting the expansion, the FOMC is clearly signaling a more hawkish turn," Long added. "The hurdle for another rate move will be significantly higher as the Fed assesses the impact of its easing campaign, with the hopes that it can maintain what little ammunition they have in case of a deterioration in the real economy."
While overall and core inflation sit below the Fed's 2 percent target, Chairman Powell indicated that there would need to be a significant increase in inflation for the Fed to raise rates.
Additionally, the Fed omitted language regarding efforts to act "as appropriate to sustain the expansion," which had been introduced in June, ahead of the first rate cut.
More on the meeting's outcomes can be found in NAFCU's FOMC Macro Data Flash report.
The FOMC will next meet Dec. 10 -11; its tentative meeting schedule for 2020 can be viewed here.