FOMC Statement Introduces More Ambiguity in Forward Guidance
October 30, 2019
A key sentence after the previous two rate cuts announced on July 31 and September 18th had read, “As the Committee contemplates the future path of the target range for the federal funds rate, it will continue to monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2 percent objective.” Today’s statement condenses that thought to
The Committee will continue to monitor the implications of incoming information for the economic outlook as it assesses the appropriate path of the target range for the federal funds rate.
Without precisely spelling out that officials want a pause in this easing sequence to assess the impact of the three cumulative reductions withing three months, this shift to a more concise and ambiguous wording regarding forward guidance will be interpreted by market players as a signaled “pause.” This will break a streak of December rate changes dating back to 2015. The first and second rate post-recession hikes were done in December 2015 and 2016, and December 2017 also saw an increase. In December 2018, the ninth and final move of that tightening cycle was done.
Copyright 2019, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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