Business

Fed leaves rates steady and signals a pause in 2020

Posted December 11, 2019 2:03 p.m. EST
Updated December 11, 2019 2:41 p.m. EST

— The Federal Reserve held interest rates steady at its December meeting on Wednesday, halting a series of rate cuts that lifted markets and countered recession fears amid ongoing trade uncertainty.

Policymakers unanimously agreed to leave rates hovering between 1.5% and 1.75%, describing the policy decision as "appropriate" to help prolong the nation's economic expansion, now in its 11th year.

The widely expected move falls in line with market expectations as the Fed has signaled it plans to move into an extended pause as it watches to see how the US economy evolves.

Thirteen of the 17 participants on the Federal Open Market Committee's policy-setting body now anticipate keeping interest rates level in 2020, according to the central bank's updated forecast. Only four members predicted that rates may need to be raised one notch higher.

That will probably disappoint President Donald Trump, who spent the past year pressuring Federal Reserve Chairman Jerome Powell to lower rates even further, most recently during a meeting at the White House last month.

Following that November 18 meeting, Trump said in a tweet he "protested" to Powell that interest rates were too high compared to other countries the US competes with, and has repeatedly blamed him for undermining economic growth.

Those complaints are unlikely to take Powell off course especially during an upcoming presidential election year when the Fed will be careful to avoid any appearance that it is helping boost the economy for the President.

Since the last Fed meeting in October, the Fed chief and his colleagues have been making the case that monetary policy is in a "good place" and probably won't change for some time unless there is some "material" change.

Powell has pointed to sluggish global growth and persistent trade uncertainty as two threats to the US economy.

For the year, the Fed maintained its outlook for the US economy, which it expects to grow at 2.2%, and then slow down to 2% next year.

Powell recently described the US economy as a "star performer" and expressed confidence that the expansion can be extended thanks to strong consumer spending and steady job growth.

Following November's stronger-than-expected jobs report, the Fed also now anticipates the country's unemployment rate to be slightly lower for the year at 3.6%. Policymakers had previously forecast in September the jobless rate landing at 3.7%.

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