- As expected, the target range for the fed funds rate (the main policy rate) was held steady at 2.25-2.50% today
- The interest rate on excess reserves was lowered by 5 basis points, though Chair Powell downplayed the move as a “small technical adjustment” that didn’t change the Fed’s monetary policy stance
- The Committee’s neutral guidance—that it will be patient in determining future policy adjustments—was unchanged
- The policy statement noted solid economic growth, albeit with household spending and business investment slowing in Q1
- The statement acknowledged a slowdown in core PCE inflation, with both headline and core rates noted to be running below 2%
Overall, Chair Powell sounded firmly neutral—doing little to change market pricing for a rate cut by the end of this year. He took a number of questions on the recent slowing in core inflation. While expressing some concern about the decline, he said transitory factors might be at play and that inflation is expected to return to the Fed’s symmetric 2% target over time amid sustained economic expansion. Powell also noted that some of the “cross-currents” in the outlook have improved (i.e. risks have moderated). He mentioned an easing in global financial conditions, improving data in China and Europe, and reports of progress in US-China trade talks. Those developments were seen as consistent with a continued patient approach to setting monetary policy.
