<\/p>\n\n\n\n
In a Nutshell:<\/strong> \u00e2\u20ac\u0153In light of global economic and financial\ndevelopments and <\/em><\/strong>muted inflation pressures, the Committee will be patient as it\ndetermines what future <\/em><\/strong>adjustments to the target range for the federal funds rate may be\nappropriate<\/em><\/strong>\u00e2\u20ac\u00a6\u00e2\u20ac\u009d<\/em><\/strong><\/p>\n\n\n\n Decision:<\/em><\/strong> Fed funds rate target range remains at 2.25% to 2.50%.\n<\/em><\/p>\n\n\n\n The\nFed has decided that it no longer has to do anything. No, it hasn\u00e2\u20ac\u2122t declared victory, but it has\ncapitulated to the will of the markets and the reality of a slowing world\neconomy. The members, and especially\nChair Powell, will sharply disagree with that characterization, but basically,\nthe FOMC gave the markets everything it hoped for: No rate hike, a clear\nindication that conditions would have to change for the Fed to hike rates again\nand a willingness to slow the normalization of the balance sheet. All this came after having indicated just four\nmonths ago that the Fed was a \u00e2\u20ac\u0153long way\u00e2\u20ac\u009d from getting to neutral. Since then there has been exactly one rate\nhike, which is hardly a long way.<\/p>\n\n\n\n So,\nwhat has changed? First, the\ntariff\/trade war with China has harmed not just Chinese growth but the world economy\nas well. Europe is suffering and U.S.\neconomic growth is moderating. When the\nthree largest economies are in a slowdown, it is time to stop, look and\nlisten. Then there was the market\nmeltdown. First, the culprit was the Fed\nraising rates too much, but that made absolutely no sense. Rates are still low, unless you think zero\ninterest rates are normal. Then the\nFed\u00e2\u20ac\u2122s reduction of the balance sheet was attacked, since it was reducing\nliquidity. But the Fed\u00e2\u20ac\u2122s balance sheet\nis still way too large, so that was a red herring. Basically, investors wanted to blame everyone\nbut themselves for the meltdown and they succeeded in pinning it on the\nFed. <\/p>\n\n\n\n So,\nwhere is the Fed now? First, Mr. Powell,\nby saying the \u00e2\u20ac\u0153case for raising interest rates has weakened somewhat\u00e2\u20ac\u009d,\nbasically changed the paradigm. Now, the\nFed has to see there is a reason to hike rates. \nMr. Powell indicated that inflation is likely to be the key. So, as long as inflation remains well\ncontained, the Fed is on hold. That\nshould anchor short-term rates at a lower level than expected.<\/p>\n\n\n\n As\nfor the balance sheet, which is more technical but still important, the pace\nwill continue, though it could be changed, and the end point will be a lot\nhigher than expected. The Fed will\nlikely stop reducing the balance sheet, nicknamed quantitative tightening or\nQT, about a half trillion dollars above where previously expected. That is about nine months sooner. <\/p>\n\n\n\n The\nmarkets, not surprisingly, loved the FOMC statement and the Fed Chair\u00e2\u20ac\u2122s press\nconference as they gave investors everything they wanted. And there is good reason to show caution, as\nthe outcome of the trade situation is still not clear. But it sure looks like this Fed Chair may\nbelieve in a triple not dual mandate: Maximum employment, stable inflation and\na solid equity market. <\/p>\n\n\n\n (The\nnext FOMC meeting is March 19,20 2019.) <\/em><\/p>\n","protected":false},"excerpt":{"rendered":" In a Nutshell: \u00e2\u20ac\u0153In light of global economic and financial developments and muted inflation pressures, the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate\u00e2\u20ac\u00a6\u00e2\u20ac\u009d Decision: Fed funds rate target range remains at 2.25% to 2.50%. The Fed has decided that it … Continue reading January 29,30, 2019 FOMC Meeting<\/span>