Following the central bank’s decision to keep interest rates unchanged, a recurring theme of “patience” was mentioned in Federal Reserve Chairman Jerome Powell’s press conference following the rate announcement. Additionally Powell mentioned that the U.S. economy is in a “good place.”
In move that was widely anticipated by most market experts, the Federal Reserve on Wednesday elected to keep rates unchanged, holding its policy rate in a range between 2.25 percent and 2.5 percent. In addition, the central bank alluded to no more rate hikes for the rest of 2019 after initially forecasting two.
“The U.S. economy is in a good place,” said Powell. “We will continue to use our monetary policy tools to help keep it there. The jobs market is strong, showing healthier wage gains and prompting many people to join or remain in the workforce. The unemployment rate is near historic lows and inflation remains near our 2 percent goal.”
The capital markets initially expected rates to remain steady after the central bank spoke in more dovish tones following the fourth and final rate hike for 2018 last December. Prior to the announcement, the CME Group’s FedWatch Tool was expecting a 98.7 percent chance that rates would remain steady.
“We continue to expect that the American economy will continue to grow at a solid pace in 2019 although likely lower than the very strong pace in 2018,” said Powell. “We believe our current policy stance is appropriate.”
More Patience in Store for Fed
“Patience” has been a mainstay in Fedspeak since the December rate hike and again in January when the central bank elected to keep the federal funds rate unchanged, saying that it will be patient moving forward with respect to further rate adjustments. Moreover, the Fed has also been saying that it will be mostly data-dependent and have more flexibility when it comes to interest rate policy decision-making.
“Since last year, we’ve noted some developments at home and around the world that bear our close attention,” said Powell. “Given the overall favorable conditions in our economy, my colleagues and I will be patient in assessing what, if any, changes in the stance of policy may be needed.”
“Much of the discussion at our meeting focused on what we should make of the varied indicators,” added Powell, “Today’s summary of economic projections, the SEP, reflects the assessments of individual committee participants and these views are in line with a broad range of other forecasts and point to a modest slowdown with overall conditions remaining favorable.”