November FOMC statement points to moderated business investment growth

By Jon C. Ogg

The Federal Open Market Committee released its statement on the decision on whether or not to raise US interest rates. As expected, no rate hike was announced at this current meeting for November. And as expected, most market participants are looking for the last rate hike of 2018 to come at the December meeting with some gradual tightening seeming likely in 2019.

Since the September FOMC meeting, the committee noted that the labour market has continued to strengthen and that general economic activity has been rising at a strong rate. It further pointed to household spending continuing to grow strongly while the growth of business fixed investment has moderated since a more rapid rate earlier in 2018.

As with the prior statement, the term “accommodative” was not used in the FOMC’s language.

While the FOMC still seems intent on raising rates ahead, this FOMC meeting note pointed out that both the overall inflation rate and inflation for items other than food and energy remain near 2% versus this time in 2017. And it was noted that indicators of longer-term inflation expectations are little changed.

Thursday’s decision was to maintain the target fed funds range at 2.00 to 2.25% in a unanimous vote of 9-0. Along with the dial mandate of price stability and full employment, the statement discussed rate hikes ahead as follows: “The Committee expects that further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labour market conditions, and inflation near the Committee’s symmetric 2% objective over the medium term. Risks to the economic outlook appear roughly balanced.”

About 20 minutes after the statement, the Dow was up 22 points and the S&P 500 was down about 6 points. The yield on the 10-year Treasury note was roughly 3.22%.

All in all, this was one of the very predictable statements and decisions.

The financial markets should have had very little postmidterm reaction to the FOMC actions. A quick two-word synopsis of this FOMC announcement under Jerome Powell as Fed Chair would simple be a ‘nothing burger.’ (