JANUARY 27, 2020 – AFTER WORLD ECONOMIC FORUM IN DAVOS, FOMC MEETS THIS WEEK
Last week, President Trump spoke at the Davos world economic forum, where he criticized the Fed’s monetary policy. Trump is demanding interest rates should be reduced to zero, a negative interest rate scenario, to stimulate the US economy he believes is being held back with rates remaining in a range of 1.50-1.75 percent.
The likelihood of an interest rate rollback at this week’s FOMC meeting is nil. Back in October, Fed Chair Powell said the FOMC will “materially reassess” the outlook before changing the policy stance, and there have been no drastic changes in the data since. Any indications to a possible change in policy may happen at the post-meeting press conference, where it’s expected Powell will outline the economic outlook for 2020. Notably, three FOMC voting members have been replaced by people who are more centrist, assuring a unanimous decision for no policy change.
It’s anticipated that Powell’s words will be cautiously optimistic, especially in light of advances in the US-China trade talks. The US economy is growing, albeit at a slow rate, unemployment remains at 50-year lows, and inflation is under control.