- The Fed left its key policy rate unchanged at 1.625%
- Most participants expect no rate change next year
- Forecasts show 2% growth, low unemployment in 2020
Having lowered rates at each of its last three meetings (a cumulative 75 bps of cuts) the Fed left monetary policy unchanged at its final meeting of 2019. That was widely expected with policymakers having signaled a shift to the sidelines following October’s cut. Powell’s comment back then–that the current stance of monetary policy was likely to remain appropriate–was codified in today’s statement. The statement dropped its previous reference to uncertainties about the outlook, though it kept a dovish touch by noting that “global developments and muted inflation pressures” will help determine the future path of monetary policy.
Looking ahead, 13 of 17 committee members expect no change in interest rates in 2020 (the other four see a single hike as likely to be appropriate). That is consistent with our view that the Fed will remain on hold throughout next year. Our own GDP growth forecast for 2020 is slightly below the Fed’s 2% projection, though we don’t think a modest shortfall would be enough for policymakers to lower rates further. As to whether we might see a hike, Chair Powell indicated that he’d need to see a persistent increase in inflation for the Fed to withdraw the stimulus it added this year. That’s a fairly high bar that we don’t think will be met in 2020. All told, it looks like (and the Fed is surely hoping) next year will see less action from the central bank.
