Wait and See: FOMC Maintains Fed Funds Rate

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As was expected, the Federal Open Market Committee (FOMC) today voted unanimously to maintain the fed funds rate in the range of 4.25% to 4.5%.

In its statement, the committee notes that the labor market continues to expand and unemployment has stabilized at a low level (currently around 4.2%). 

Still, inflation remains above the fed’s target rate of 2%.

In a separate release, the Fed takes a more negative stance, stating that “swings in net exports have affected the data” it uses and that “uncertainty about the economic outlook has increased further.”

“The committee is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen,” the release states.

In a statement, Selma Hepp, chief economist for Cotality, says, “Fed officials are signaling a wait-and-see approach to the impact global trade uncertainties will have on the US economy.”

“The Fed is trying to straddle keeping inflation moving towards the target and ensuring employment doesn’t cool considerably more – not an easy task given the current policy context,” Hepp says. “One thing is for certain, interest rates are highly unlikely to dip down to 2021 levels, when rates hovered around 3 percent. We foresee a 6 percent mortgage rate, or higher, to be the new normal for the 30-year fixed mortgage for the next two years.”

Photo: Public Domain

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