FEBRUARY 4, 2019 – POWELL CALLS FOR PATIENCE
The Fed held the benchmark interest rate steady at its meeting last week. No rate increase was expected, however, newsworthy was that the FOMC has become far more cautious regarding the pace of future rate increases.
Fed Chair Powell said the “case for raising rates has weakened somewhat”; the direction of the next move will be dependent on the incoming data. The Fed will act when it feels it is right for the economy and the American people. Inflation has been persistently weak, the global economy has slowed and the impact of the recent government shutdown is yet to be determined. The situation calls for patience.
The good news last week was the economy added jobs for the 100th consecutive month, with 306,000 new jobs created in January; employment weathered the shutdown well. It’s encouraging as businesses continue to add to their payrolls, the economy keeps expanding.
If the economy is not stalling, and inflation picks up, that will create difficulties in the economy and could result in a more aggressive Fed policy in the future.