(12 December 2019)DAILY MARKET BRIEF 2:Federal Reserve Keeps Rates Steady and Sees Long Pause

The Federal Reserve held its benchmark interest rate steady and signaled no appetite to raise it anytime soon. After lowering rates at their three previous meetings to guard the U.S. economy from the effects of trade tensions and a global slowdown, Fed officials on Wednesday indicated comfort with leaving policy on hold through next year while keeping an eye on those risks. Their policy rate is in a range between 1.5% and 1.75%. Officials in their policy statement continued to express an upbeat view of the economy. "The committee judges that the current stance of monetary policy is appropriate to support sustained expansion of economic activity," strong hiring conditions and stable prices, the statement said. In a sign of slightly more confidence in this position, they dropped from their statement a phrase that in October had said "uncertainties about this outlook remain." The statement continued to highlight muted inflation pressures and global developments as risks worth monitoring and contained few additional changes. Fed officials' new projections showed most officials believe rates are low enough to stimulate growth. They expect that if their economic outlook holds, they can keep rates steady through 2020. In this scenario, most see the Fed raising rates once or twice after that to return them closer to levels that neither spur nor slow growth.

By Arnaud Masset