Fed Leaves Main Rate Unchanged, Saying Policy Is Appropriate

Thursday, 30 January 2020 02:19 WIB

Federal ReserveThe Fed


The Federal Reserve kept its benchmark interest rate steady and continued to signal policy would stay on hold for the time being as the U.S. enters a presidential election year.

The target range of the federal funds rate of 1.5% to 1.75% is “appropriate to support sustained expansion of economic activity,” the Federal Open Market Committee said Wednesday, repeating language from the December statement.

Immediately after the decision, U.S. stocks extended gains while yields on the 10-year Treasury were little changed, as was the dollar. Traders trimmed bets on easing by the Fed this year.

Policy makers also changed their language to say that the current stance of monetary policy is appropriate to support “inflation returning to the committee’s symmetric 2% objective.” Previously they had said policy was supporting inflation “near” the goal.

Their preferred personal consumption expenditures price index rose 1.5% for the 12 months ending in November.

Officials also approved a 5 basis-point increase on the rate they pay on excess reserves to 1.6% -- a technical adjustment designed to keep the main funds rate within its designated range. The Fed also raised its overnight reverse repurchase rate by the same amount to 1.5%. It also extended term and overnight repos at least through April. The central bank had earlier signaledsuch measures were possible.

In addition, the FOMC downgraded its assessment of household spending to say it has been rising at a “moderate” pace, instead of its earlier characterization of the rate as being “strong.” The committee repeated that economic activity has been rising at a “moderate” rate, with “strong labor market conditions.”

Source : Bloomberg




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