The U.S. Federal Reserve (FED) has decided to hold rates at a static 1.50%-1.75% to close 2019. Today’s announcement has come as little surprise to the markets, producing minimal volatility. In fact, the leading U.S. indices are standing pat, with the DJIA DOW (0), S&P 500 SPX (+6), and NASDAQ (+25) experiencing modest volatility.

Without a doubt, 2019 has been one of the more exciting FED years in recent memory. Policy went from being “patient” to “flexible” to “accommodative” in the course of 12 months. The seismic shift from “flexible” to “accommodative” occurred late last June, with Jerome Powell citing lagging inflation and economic uncertainty as reasons for favoring dovish policy. Subsequently, July, September, and October brought ¼ point rate cuts for the first time since the financial crisis of 2008-12.

So, where does the FED stand just ahead of 1 January 2020? Ultimately, it looks like they are back to being “data dependent” and “patient.”

FED Interest Rate Decision: Highlights & Recap

The final FED meeting of 2019 is in the books. With most analysts already looking ahead to 2020, here are the highlights of today’s rate statement:

• “The Committee decided to maintain the target range for the Federal Funds Rate at 1.5% to 1.75%.”
• “Job gains have been solid in recent months, with unemployment remaining low.”
• “On a 12-month basis, overall inflation and inflation for items other than food and energy are running below 2%.”
• “Although household spending has been rising at a strong pace, business fixed investment and exports remain weak.”
• “The Committee will continue to monitor the implications of incoming information for the economic outlook, including global developments and muted inflation pressures, as it assesses the appropriate path of the target range for the Federal Funds Rate.”

Bottom Line: There really isn’t much to see here. The FOMC voted unanimously to hold rates firm and adopt a data-dependent policy moving forward. 

Barring unforeseen economic developments, the chance of any rate adjustment is not favorable until at least September 2020. In fact, the CME FEDWatch is assigning odds of better-than-50% to rates being held firm until the 5 November 2020 FED meeting. At this point, the markets appear to be expecting a long period of FED silence. Only time will tell if these assumptions are correct.