An increasingly transparent Federal Reserve Board did the expected at the conclusion of its two-day FOMC meeting, by opting to vote unanimously for no change in interest rates. This latest decision, which had been widely telegraphed for weeks, followed three rate cuts over the summer and early fall. The stock market firmed slightly on this news.
In a statement explaining its decision, the FOMC suggested that monetary policy is likely to stay where it is for a period of time, which we believe could be all of 2020, In the statement, “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.”
Meanwhile, the FOMC's language was consistent with recent monetary statements, which have maintained that policy is in “a good place.” Also, expectations for gradual increases in rates after this year are coming down, even as the economy shows no major change in outlook.
This was a constructive action, we believe, and the accompanying statement was sufficiently reassuring for the stock market to, as noted, move grudgingly higher in the first minutes after it was released.
At the time of this article's writing, the author did not have positions in any of the companies mentioned.