Fed leaves low rates alone and sees no moves in near future

https://apnews.com/c9e879115354592a7156c6828f18c0c9
WASHINGTON (AP) — Chairman Jerome Powell made clear Wednesday that the Federal Reserve is prepared to keep its benchmark interest rate very low through at least next year — and possibly longer.
Fueling that expectation is the growing belief of Fed officials that inflation will remain tame even as the economy keeps growing modestly and the job market remains solid. The lowest unemployment rate in a half-century — 3.5% — won’t necessarily fan high inflation as it might have in the past, Powell suggested at a news conference.
On Wednesday, the Fed left its key short-term rate in a low range of 1.5% to 1.75% after having reduced it three times this year. Powell had previously characterized those rate cuts as “insurance” that would offset the drags from the U.S.-China trade war and global slowdown. But on Wednesday, he boldly suggested that the Fed wouldn’t likely reverse those cuts for the foreseeable future.
“Inflation is barely moving up, notwithstanding that unemployment is at 50 year lows and expected to remain there,” Powell said at his news conference. “We have learned that unemployment can remain at quite low levels for an extended period of time without unwanted upward pressure on inflation.”
In a further sign of its confidence, the Fed’s latest policy statement dropped a phrase it had previously used that referred to “uncertainties” surrounding the economic outlook. This change suggested that the Fed is now less worried about economic risks from the trade fights or global slowdown.
With the Fed’s key rate likely to stay where it is, consumers interested in buying a home or car should continue to enjoy low borrowing costs. Businesses will likely also enjoy lower interest rates. Savers, though, will struggle to earn a return above the inflation rate.
Powell signaled that persistently low inflation is allowing the Fed to pursue low interest rate, or “accommodative,” policies to sustain the 11-year economic expansion and try to create the conditions for more people to find jobs.
“Even though we are at 3½% unemployment, there is actually more slack out there in a sense,” Powell said. “And the risks of using accommodative monetary policy, our tool, to explore that, are relatively low.”
The chairman expressed optimism about the economy and satisfaction that the Fed’s rate cuts this year may have helped prolong growth.
“Both the economy and monetary policy are in a good place,” he said.
Many analysts note, though, that the economy faces threats from the trade conflicts, a stumbling manufacturing sector and cutbacks in business investment. Some say the Fed may feel compelled to cut rates at least once next year.
Still, in updated forecasts the Fed issued Wednesday, no officials penciled in a rate cut in 2020. Instead, four Fed officials said they expected a rate increase next year. The remaining 13 officials projected no change to rates.
“If I were Powell, I would say I have things exactly where I want them,” said David Jones, an economist and author of five books on the Fed. “Despite all the people who criticized Powell for not easing sooner or not easing more, it looks like this mid-course correction of three rate cuts was almost perfect in keeping the economy growing on a sustained basis.”
For now, the chairman has managed to draw his colleagues on the Fed’s policymaking committee fully into his corner. No Fed officials dissented from Wednesday’s decision to keep rates unchanged — the first time in five meetings that a vote was unanimous.
Powell has suggested that this year’s rate cuts have helped lower mortgage rates and spurred growth in home purchases. Auto sales have also remained healthy as more Americans have borrowed to buy cars.
Still, Powell’s satisfaction with the Fed’s policies comes after the central bank executed a U-turn this year. The Fed raised its benchmark short-term rate four times in 2018 after growth began the year at a healthy pace. But as the trade conflicts intensified, the stock market fell at year’s end and inflation slowed rather than picked up as expected, the Fed reversed course and cut rates three times.
“Toward the end of 2018, there was still a sense that the economy was growing at around 3%, and it didn’t,” he said. “I didn’t expect to face the challenges, but I think we did face them, and I’m pleased that we moved to support the economy in the way that we did.
Fed policymakers have been weighing their options to stabilize short-term lending in money markets. In late September, overnight lending markets seized up, and banks and other financial institutions struggled to find short-term loans. This problem briefly lifted the Fed’s benchmark rate out of its target range.
Powell said that the Fed’s efforts to boost banks’ cash reserves by purchasing Treasury bills and its own short-term lending have been effective.
“For the last couple of months, (short-term lending) markets have been functioning well,” he said.
In the longer run, Powell said that the Fed is considering “fairly straightforward, noncontroversial changes” to financial regulations to make it easier for large banks to provide short-term loans.


The Fed is optimistic about the economy going through 2020 - with low inflation and high employment - NO RRECESSION111
Poor DPST's won't get their Xmas wish for a recession in their stocking for 2020!

The Fed is optimistic about the economy going through 2020 - with low inflation and high employment - NO RRECESSION111
Poor DPST's won't get their Xmas wish for a recession in their stocking for 2020! Originally Posted by oeb11

Anyone who has been tuned into the economic forecasts understands that most people who are predicting the future economy are saying a recession in the near future is highly unlikely.

Unemployment will remain about the same. Low inflation. However, GDP will be in the low 2s and not 3.0% or more as predicted by Trump. U.S. economy looks solid over the next 2 years.

Updated: December 11, 2019

Economic growth may accelerate slightly in Q4, but will be moderate in 2020

We expect US Real GDP growth to come in at 2.0 percent for Q4 over Q3 and annual growth for 2019 to be 2.3 percent. While this rate is lower than last year’s 2.9 percent growth rate, we do not believe growth will dip below 2 percent in 2020.

The US Leading Economic Index declined for a third consecutive month in October and its six-month growth rate turned negative for the first time since May 2016. While the US economy could weaken somewhat over the coming months, the recent trend in the US LEI is still consistent with continuing albeit moderate growth in the US economy.

The drivers of growth next year will likely be different from those seen this year. The growth contribution from real consumer spending is likely to rise this quarter, but it will gradually weaken over in 2020. However, we expect improvements in business sentiment to bolster capital formation, which will help to offset softer consumer spending. Furthermore, a sustained improvement in housing authorizations and starts, supported by lower interest rates, indicates that residential investment will also provide a tailwind for the US economy next year.

https://www.conference-board.org/data/usforecast.cfm

I wonder how Trump would cope with 20% rates like Carter had to deal with from the Fed?



.

I wonder how Trump would cope with near 0% rates that Obama enjoyed throughout his Presidency. Oh yeah, he's hitting it out of the park.

I wonder how Trump would cope with near 0% rates that Obama enjoyed throughout his Presidency. Oh yeah, he's hitting it out of the park. Originally Posted by gnadfly

If he is hitting it out of the park.....why is GDP at under 2%?

Why is he having to ask the Fed for lower rates?


Why is he running Trillion dollar deficits?

All Trump gas done I'd redistributed wealth to the stock market.

Has anyone informed you Obama has been out of office for almost 3 years.

If he is hitting it out of the park.....why is GDP at under 2%?

Why is he having to ask the Fed for lower rates? \


because everyone else is running negative interest rates. lower ours to match



Why is he running Trillion dollar deficits?


1/3 the debt burn rate to Obama. where were you between 2008-2016? Guatemala?


All Trump gas done I'd redistributed wealth to the stock market.


my stock market u poor bastard! bhahaaaa


Has anyone informed you Obama has been out of office for almost 3 years. Originally Posted by WTF

has anyone informed u that Trump's reversal of Obama's poor economic policy and over-regulation stagnated GDP?



thank you inept poster!

Has anyone informed you Obama has been out of office for almost 3 years. Originally Posted by WTF

Yes, the fact that he is no longer in office is reflected in the excellent appointments to the Federal Courts and the SCOTUS.

Yes, the fact that he is no longer in office is reflected in the excellent appointments to the Federal Courts and the SCOTUS. Originally Posted by friendly fred

+1

the idea that low interest rates can continue under high employment, with low inflation, indicates systemic problems, long-term. growth and wages fuels interest rate hikes, and we are not moving much there. the World isn't, the US fares best, but the high deficits (a record in November, despite record tax collections) will continue to suppress real growth.

Trump's economy is good, but it is still piggybacking on Obama's rescue of the Bush near-Depression when Obama assumed Office. Obama's employment numbers were great, same with Trump, but Trump's are mostly from "kinetic energy" after Obama's economic turnaround. he did cut some regulations, which helped, but any President should have sustained high employment numbers during this term.

Read FED-UP about the ignorance of the feds and the banks .