Midterm Elections Are Unlikely to Change Fed’s Trajectory
WASHINGTON — The Federal Reserve’s Open Market Committee, which sets monetary policy, will issue a policy statement at 2 p.m. on Thursday after a two-day meeting.
■ Investors expect the Fed to leave its benchmark interest rate unchanged, in a range of 2 percent to 2.25 percent.
■ The Fed’s upbeat economic outlook can be also likely to remain substantially unchanged.
■ The Fed can be required to raise its benchmark rate at its next meeting, in December.
The Big Picture
The seismic shift within the political landscape on Tuesday, as Democrats regained control of the House, can be unlikely to matter much for the course of monetary policy. The economy continues to grow, in addition to the Fed has made clear of which This particular plans to keep raising rates, slowly nevertheless steadily, well into next year.
The next rate increase, however, can be not expected until the Fed’s final meeting of the year, in December.
Thursday’s meeting can be largely required to be a place holder, a chance for Fed officials to discuss the latest economic data. Bank of America’s economists titled their preview of the meeting This particular week “See you in December.”
For today, the data are not bad. The economy added 250,000 jobs in October, in addition to the unemployment rate fell to 3.7 percent. Inflation remains close to the 2 percent annual pace the Fed regards as optimal. On the list of concerns can be the fact of which housing in addition to corporate investment have weakened. nevertheless there can be little reason to believe the Fed’s economic outlook has changed significantly since its last statement, in September.
The Fed can be currently raising its benchmark rate by a quarter of a percentage point every quarter. At of which pace, the rate will reach about 3 percent by the middle of next year. of which can be roughly the level the Fed regards as neutral, meaning This particular might neither stimulate nor discourage economic activity.
Some Fed officials are already pressing for the Fed to raise the rate into restrictive territory, arguing of which inflation can be likely to rise if the central bank does not begin to step on the brakes. A smaller number of officials, however, argue the Fed can be moving too quickly. Wage growth can be just beginning to boost, raising concerns the Fed will slow the economy as workers are starting to reap real benefits.
Jerome H. Powell, the Fed’s chairman, has said of which there can be no need to make a judgment until next year.
Mr. Powell has described the Fed’s task as a balancing act. On the one hand, he wants to raise rates to keep inflation in check. On the various other hand, he can be not trying to slow economic growth — at least not yet.
The Trump Effect
Against This particular balancing act, President Trump has repeatedly attacked the Federal Reserve for raising interest rates too quickly, describing the central bank as “crazy,” “loco,” “going wild” in addition to “out of control.”
Mr. Trump’s stated concern can be of which higher rates will slow economic growth. He also has expressed concern of which higher rates will increase the federal government’s borrowing costs.
“Every time we do something great, he raises the interest rates,” Mr. Trump complained to The Wall Street Journal, adding of which his handpicked chairman, Mr. Powell, “almost looks like he’s happy” to be raising rates.
So far, there can be no sign of which Mr. Trump’s complaints will alter the course of policy. Members of Congress, including some Republicans, have defended the Fed’s independence. in addition to Fed officials have insisted they plan to make policy without regard to the president’s views. “Political pressure will be in no way a consideration in monetary policy decisions,” Richard Clarida, the Fed’s newly confirmed vice chairman, said last month.
More News Ahead
This particular meeting can be a milestone of sorts. This particular can be the last time the Fed plans to conduct a policy meeting without holding a news conference afterward. Mr. Powell, a lawyer using a more straightforward speaking style than the economists who have typically run the Fed, plans to take questions through the news media after each of the eight meetings of the Federal Open Market Committee in 2019.
The news conferences, begun under former Fed Chairman Ben S. Bernanke in 2011, have amplified the role of the Fed’s chairman as an official spokesman, reducing public focus on remarks by various other officials. nevertheless the Fed quickly fell into a pattern of announcing policy improvements at meetings using a news conference, which turned half of the scheduled policy meetings into waiting periods.
Mr. Powell’s plan increase his opportunities to speak for the Fed in addition to communicate the rationale behind its approach — in addition to This particular increases the Fed’s flexibility in determining the timing of future increases within the benchmark rate.