In a statement, the policy committee said: “Job gains have been solid, on average, in recent months, and the unemployment rate has remained low. Although household spending has been rising at a moderate pace, business fixed investment and exports remain weak.”
Powell is scheduled to hold a news conference at 6.30am AEDT. He’s expected to be pressed about the outlook for inflation as well as the central bank’s balance sheet.
The yield on the US 10-year note was 5 basis points lower at 1.61 per cent at 2.13pm in New York, according to Bloomberg data. It was unchanged from just prior to the statement.
The Fed did decide to increase the interest it pays banks for excess reserves by five basis points to 1.60 per cent, a technical adjustment officials say was needed to keep the federal funds rate around the middle of the target range.
The statement said bill purchases will continue “at least into the second quarter of 2020” and that repo operations will continue “at least through April”.
“We expect the Fed to set out in March how and when it intends to wind down the bill purchases; we expect a taper to perhaps $US30 billion in May and $US5-to-$US10 billion in June,” Pantheon Macroeconomics’ Ian Shepherdson said in a note. “The Fed will need to keep the balance sheet rising roughly in line with nominal GDP growth in order to ensure ample reserves, so we doubt purchases will stop altogether.”
The statement made no mention of the coronavirus.
“On a 12‑month basis, overall inflation and inflation for items other than food and energy are running below 2 per cent,” Fed policymaker said. “Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed.
“Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee decided to maintain the target range for the federal funds rate at 1‑1/2 to 1-3/4 per cent.
“The Committee judges that the current stance of monetary policy is appropriate to support sustained expansion of economic activity, strong labour market conditions, and inflation returning to the Committee’s symmetric 2 per cent objective.
“The Committee will continue to monitor the implications of incoming information for the economic outlook, including global developments and muted inflation pressures, as it assesses the appropriate path of the target range for the federal funds rate.”
“We don’t expect recent developments to materially impact economic fundamentals,” LPL Financial chief investment strategist John Lynch said ahead of the statement. “The Fed expects moderate economic growth in 2020, and a Fed rate pause may be warranted unless the outlook changes.”