June 24, 2019 — FOMC Votes to Keep Rates between 2.25%-2.5%


On Wednesday, the FOMC voted, by a margin of 9-1, to maintain the benchmark interest rate.  They are taking the stance that rates likely do not need to be adjusted again this year, but the case for “accommodation” has strengthened.

This leaves the door open for policy loosening, depending on how the economy performs in the second half of this year.  They also conceded inflation is running below their 2 percent target, with a forecast for headline inflation to reach 1.5 percent this year.  Core inflation (excluding food and energy) is expected to run at 1.8 percent. The Fed will be closely monitoring the economic data, and wants to “act appropriately to sustain the expansion.”

The Fed is divided on when action should be taken, with eight members favoring a cut in 2019, eight for holding steady and one for another rate hike.  For 2020, nine members wants rates to go down to 2.1 percent, and then reversing in 2021, with rates returning to 2.5 percent.  Despite the wording in the Fed’s statement, the markets continue to expect the Fed will cut rates imminently, perhaps as soon as July.