Novem­ber FOMC state­ment points to mod­er­ated busi­ness in­vest­ment growth

By Jon C. Ogg

Financial Mirror (Cyprus) - - WORLD -

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.’ (

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