The Federal Reserve just concluded its latest FOMC meeting and, as widely expected, voted to keep interest rates unchanged. This stability followed a trio of rate reductions during the second half of 2019. However, with the central bank seemingly convinced that the nation's economy was on reasonably firm ground, it voted to opt for the status quo.
In making this decision (the second straight meeting in which it voted to keep borrowing costs unchanged after three consecutive increases earlier in the concluding six months), the bank tweaked its post-meeting statement to reflect a stronger commitment to bringing up inflation.
The Fed apparently worries that low expectations will continue to keep inflation and, as a result, interest rates at below-normal levels, thus providing little flexibility to cut borrowing costs during future downturns. In fact, the Fed has indicated that it will allow inflation to run above target for a while.
Finally, the Fed adjusted the language of its statement to now characterize consumer spending as moderate. At its last meeting, it suggested that such outlays were strong. This statement, meantime, had little effect on the stock market, which remains nicely higher as we head into the latter stages of the session.
– Harvey S. Katz, CFA
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
