US Fed keeps rates unchanged on 'favourable' economic outlook
(Dec 12): The US Federal Reserve has voted to keep interest rates unchanged in its final policy meeting for the year.
In what was the first unanimous vote since May by the 17-member committee, the benchmark lending rate was left unchanged at its current target range between 1.5 to 1.75%.
“The US economic outlook remains a favourable one despite global developments and ongoing risks,” says Fed Chairman Jerome Powell at the press conference in Washington following the Fed’s open committee meeting on Dec 11.
The latest vote means that borrowing costs in the US will remain at status quo as the superpower heads into next year’s presidential election with moderate economic growth and low unemployment.
The central bank was forced to cut interest rates three times this year to prevent a slowdown fuelled largely by President Donald Trump's trade war with China.
For now, Powell believes the “current stance of monetary policy will likely remain appropriate, as long as incoming information about the economy remains broadly consistent with the current outlook”.
“Our operations have gone well so far and pressures in money markets over recent weeks have been subdued,” he adds.
US stocks reacted immediately to the announcement, with the S&P 500 closing 0.3% higher on Wednesday.
Meanwhile, the yield on the benchmark 10-year Treasury declined to 1.786% from 1.833% the day earlier.
However, Powell noted that the committee would consider widening reserve management-related treasury purchases to include short-term coupon-bearing securities to ease liquidities in the market.
This is to address any unforeseen end-of-year strains that may arise. “We stand ready to adjust the details of our operations as necessary to keep the federal funds rate in the target range,” he adds.
