Announcement comes with revised growth forecasts and interest rate projections
The meeting of the US Federal Open Market Committee (FOMC) concluded today with the announcement that the US Federal Reserve will maintain its overnight interest rate at the target range of 4.25 to 4.5 per cent.
The decision to hold had been priced in by markets going into the meeting, but there is a great deal of uncertainty about the path of interest rates at future Fed meetings. Fed Chair Jerome Powell has stressed data-dependence and patience in prior meetings and comments leading up to today’s announcement. However, there are signs of weakening in the US economy as GDP growth appears to be slowing and uncertain trade policy has limited businesses’ decision making.
Despite those risks, the decision statement was relatively neutral to positive in its tone.
“Recent indicators suggest that economic activity has continued to expand at a solid pace,” the announcement reads. “The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid. Inflation remains somewhat elevated.”
Markets remain relatively sensitive to headlines and the specific commentary that emerges from Powell’s press conference may come to impact the direction taken by US equity investors.
President Donald Trump’s trade policy has complicated Powell’s decisions. The decision to tariff close trading partners has caused inflation expectations to jump higher, while some analysts have predicted GDP growth may slow sharply.
The decision leaves US policy rates far higher than their Canadian equivalents, especially after the Bank of Canada’s decision to cut interest rates last week.
