AFP, Washington :
The Federal Reserve is overwhelmingly expected to begin 2020 as it ended 2019: by leaving interest rates right where they are.
As they prepare to hold their first policy meeting of the year in the coming week, central bankers are sending clear signals they think monetary policy is in a sweet spot.
Frayed nerves on both sides of the Pacific have begun to ease after President Donald Trump last month called a truce in his China trade war, and trade relations within North America have resolved as well, with the signing of a new continental pact.
Meanwhile, employers are still hiring, workers are still spending, unemployment is still low and inflation is still tame.
In a nutshell, US growth appears to be cooling back towards a long-term trend of around two percent and the recession scare of late summer 2019 feels far off.
Both the economy and policy are “in a good place,” as Fed number two Richard Clarida said in a speech this month.
So after cutting rates three times in 2019, Fed policymakers have made it clear they will not move again unless things get significantly and unexpectedly worse.
“They’ve been taking a victory lap for the last couple of months and I expect them to continue doing that,” economist Joel Naroff told AFP.
Futures markets have taken that expectation to the bank. As of Friday, they predicted the Fed will not resume cutting interest rates until September at the earliest. But can the Fed really hold its breath until then?
Fed Chairman Jerome Powell signaled in December the central bank is keeping an eye on “global developments,” a veiled reference to China’s slowdown and the Brexit saga.
The International Monetary Fund this month again cut its growth forecasts for the world and for the United States.
The Federal Reserve is overwhelmingly expected to begin 2020 as it ended 2019: by leaving interest rates right where they are.
As they prepare to hold their first policy meeting of the year in the coming week, central bankers are sending clear signals they think monetary policy is in a sweet spot.
Frayed nerves on both sides of the Pacific have begun to ease after President Donald Trump last month called a truce in his China trade war, and trade relations within North America have resolved as well, with the signing of a new continental pact.
Meanwhile, employers are still hiring, workers are still spending, unemployment is still low and inflation is still tame.
In a nutshell, US growth appears to be cooling back towards a long-term trend of around two percent and the recession scare of late summer 2019 feels far off.
Both the economy and policy are “in a good place,” as Fed number two Richard Clarida said in a speech this month.
So after cutting rates three times in 2019, Fed policymakers have made it clear they will not move again unless things get significantly and unexpectedly worse.
“They’ve been taking a victory lap for the last couple of months and I expect them to continue doing that,” economist Joel Naroff told AFP.
Futures markets have taken that expectation to the bank. As of Friday, they predicted the Fed will not resume cutting interest rates until September at the earliest. But can the Fed really hold its breath until then?
Fed Chairman Jerome Powell signaled in December the central bank is keeping an eye on “global developments,” a veiled reference to China’s slowdown and the Brexit saga.
The International Monetary Fund this month again cut its growth forecasts for the world and for the United States.
