Key Points

  • The FOMC held rates steady and signaled they would likely remain in the current range through next year.

  • The only key change to the accompanying statement was the removal of the word “uncertainties” regarding the economic outlook.

  • Estimates for the fed funds rate within the “dots plot” were lowered for each of the next three years.

Much to no one’s surprise, the Federal Open Market Committee (FOMC) left the federal funds rate unchanged today in a target range of 1.5% - 1.75%; while signaling it would keep rates at their current level through 2020. The key statement: “The committee judges that the current stance of monetary policy is appropriate to support sustained expansion of economic activity, strong labor market conditions, and inflation near the committee’s symmetric 2% objective.”

It was the first unanimous vote since last May, with the FOMC’s statement noting it would continue to monitor economic data, “including global developments and muted inflation pressures.” The only possibly-perceived hawkish element to the statement was the removal of an earlier reference to “uncertainties” regarding the economic outlook.

The FOMC also released new quarterly forecasts, as follows:

  • The median estimate for the fed funds rate is 1.6% at the end of 2019 and 2020, 1.9% in 2021 and 2.1% in 2022 (all are down from the September forecast).
  • Thirteen officials expect rates to stay on hold next year; while four see a hike as appropriate.
  • The unemployment rate is expected to be 3.5% by late 2020, the same as it is now; with the long-run unemployment rate seen at 4.1%, down from 4.2% in the September forecast.
  • Economic growth is expected to be 2% in 2020 and 1.9% in 2021; both unchanged from the September forecast.
  • The core personal consumption expenditures (PCE) measure of inflation is expected to be 1.6% in 2019 (down from the September forecast), 1.9% in 2020 and hit 2% by 2021 (both unchanged from the September forecast).