FOMC monetary policy remains unchanged - Rabobank

  • FOMC monetary policy remains unchanged - Rabobank

FOMC monetary policy remains unchanged - Rabobank

Meantime, the unemployment rate held at 3.7% in October, a half-century low, and wages rose 3.1% on the year, the biggest year-over-year increase since 2009. Its brief statement was almost identical to the one the Fed issued in September.

Fed officials worry that such low unemployment and higher wages could speed up inflation, forcing the central bank to raise rates more aggressively, and tip the economy into recession.

The Fed's meeting came after the Labor Department reported last week that the US economy added a larger-than-expected 250,000 jobs in October, with the unemployment rate unchanged at 3.7 percent, the lowest level in nearly five decades.

Mr McMillian also acknowledged policymakers noted "business investment has moderated", which may be a drag on future growth.

Along with the move Thursday to keep the benchmark rate anchored at its current level, the committee voted to maintain the rate the Fed pays on excess bank reserves at 2.2 percent. Analysts will be studying the minutes of this week's meeting, to be released in three weeks, for any insight into economic threats Fed policymakers may see, such as the trade war between the United States and China. Making that change, which is seen as unlikely, would be dovish and suggest the central bank is closer to the end of the rate cycle. "As you know, the stock market can be extremely volatile".

The economy otherwise has been humming along strongly, and the FOMC reiterated its belief that "economic activity has been rising at a strong rate". "We need interest rates to be gradually, very gradually, moving back toward normal".

Michael Pearce, senior US economist with Capital Economics, thinks that would be followed by two more rate hikes in the first half of 2019. For that reason and to avoid confusion, it may prefer waiting until December to make the change to IOER, when it actually raises its main policy target, said Deutsche Bank Securities economist Brett Ryan.

Some officials have indicated the recent pullback could mollify concerns that low volatility and rising asset values have fueled excessive risk-taking.

With November's expected pause in rate hikes behind it, the market now will turn its sights toward December.

The performance of inflation over the next year will be central to determining how their policy path evolves.

According to a statement, the Fed anticipates "further gradual increases" will come alongside economic growth, strong labor market conditions and inflation.

The statement also described job growth as "strong".

As it happens, this week's meeting will be the last that will not include a news conference by the Fed chairman. In an interview with The Wall Street Journal last month, Mr. Trump cited the Fed as the top risk facing the economy.

Fed officials have stressed that their monetary policy decisions will be made without any consideration of politics.

For now, the Fed has sent strong signals it plans to stay the course. "The job of the Fed is to remain focused on the facts of the economy and to be independent of the administration".