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US Federal Reserve holds rates steady, no appetite to hike for now

Fed predicts no interest rate cuts in 2020, ignoring President Trump’s calls to boost the economy

US Federal - US Federal Reserve holds rates steady, no appetite to raise it anytime soon
The Fed’s rate-setting committee voted 10-0 on Wednesday’s action, the first time since May with a unanimous outcome

As markets widely expected, the US Federal Reserve held its benchmark interest rate steady after its two-day meeting concluded Wednesday signaling no plans to cut rates in 2020.

President Trump has repeatedly urged the Fed to slash rates, but the central bank says the US economy is in a good place and does not need an extra boost.

The Fed cut interest rates by a quarter-percentage point at its past three meetings, most recently in late October to a range between 1.5% and 1.75% in an effort to calm recession fears on Wall Street and counter the negative impact of Trump’s trade war with China. The benchmark US interest rate is currently just shy of 1.75%, down from nearly 2.5% a year ago.

EAD: Markets widely expect US Fed to hold rates steady

Officials in their policy statement continued to express an upbeat view of the economy.

“The labor market remains strong,” and the economy has been growing “at a moderate rate,” the Fed added in a statement announcing its decision to keep interest rates unchanged.

“The committee judges that the current stance of monetary policy is appropriate to support sustained expansion of economic activity,” added the statement.

Economy will grow 2% in 2020 

Fed Chairman Jerome Powell said at a news conference that the US "economic outlook remains a favorable one."

Fed leaders predict the economy will grow 2% next year, a downgrade from 2.2% growth this year and 2.9% in 2018.

For months, the Fed has stressed there were many “headwinds” and “uncertainties” about the economic outlook, but there is no longer any mention of that in the official statement, an indication that the central bank thinks the economy is stronger now than it was over the summer.

Meanwhile, analysts at the multinational ING Group hailed the Fed on a job well done.

“We have had three interest rate cuts from the Federal Reserve totalling 75 basis points. Equities are up more than 10% back to new all-time highs, the yield curve has re-steepened while a better balance to the macro data has provided greater optimism that a recession will be avoided,” said analysts at the ING Group.  

The Fed’s rate-setting committee voted 10-0 on Wednesday’s action, the first time since May with a unanimous outcome.

A CNBC survey released Tuesday said it expected Federal Reserve policymakers will go into hibernation for as much as six months, keeping rates unchanged until at least the summer.

“Friday’s blowout jobs report makes it less likely the central bank will move to cut interest rates as the Fed’s dual mandate when assessing monetary policy is maximizing employment and stabilizing prices,” said CNBC.

— Adds comments from Fed Chairman Jerome Powell — 

Contact Uttara Choudhury at [email protected]

Follow her on Twitter: @UttaraProactive 

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