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The US Federal Reserve Meeting: What to Expect Tomorrow? – Tim Bellamy (01/28/2020)

If you have been keeping tabs on the activities of the US federal reserve system, you’d be aware that another Federal Open Market Committee (FOMC) meeting is tomorrow. The meeting, without doubt, is pivotal as there are several predictions as to the decisions of the committee with respect to interest rates.

The stimulus from last year has already caused a boost in some parts of the economy; stocks closed out at an all-time high at the end of 2019. Tensions between Washington and Beijing are already beginning to subside with the “phase one” trade deal.

Although there are still some uncertainties in the economy: The manufacturing sector isn’t looking swell, job gains in the U.S slowed over the past year, business investment looks quite weak. All of these still create major causes of concern for the FOMC.  

However, here are some things you might want to look out for from the first FOMC meeting of 2020;

Interest Rates To Remain the Same

A major takeaway from the press conference of Jerome Powell, the Fed Chairman, in the December meeting is that the committee does not currently see any need for a cut or hike in the rates.

Interestingly, a lot of the other members on the committee also seemed to agree with Powell on this, even members who were against the cuts in the rates from last year.

Another major pointer that the rates would most likely remain the same is the fact that there are no current indicators of recession and inflation rates remain below 2% which is the target set by the government. And according to the FOMC, rates would be hiked when price pressures began to approach this threshold.

Some stakeholders have begun to show concern on how long the Fed plans to stay on the sidelines. In reaction to this, officials have stated that they expect inflation to return to the 2% target. Although not much expansion has occurred towards this end. But all indications from Powell’s statements last year show that much of the actions of the committee would depend on existing data as according to him; ‘We will continue to monitor the data and act as needed’. 

Also considering the rate cuts from last year, several questions exist on the effects of these cuts. Although, the housing market seems to have felt the impact of the rate cuts the most. Mortgage rates came down significantly, and have remained quite low ever since. 

Another important factor involved in the decisions of the FOMC is the implications of the “phase one” deal. Currently, trade tensions seem to have calmed down but it’s important to still be on the lookout for the implications of the deal, especially considering that there is still some negativity surrounding the trade war.

The implications of all of this are that considering how the rate cuts from 2019 have boosted the housing market, this might be the best time to finance your mortgage. Also, this might be the best time to settle debts so you can now focus on investing in the future. 

As for the stock market low rates have indeed helped the market, but now people are worried at the moment over spread of the coronavirus in Asia. Mike Swanson and David Skarica did a podcast to discuss whether or not the coronavirus will make the stock market sick now? We also are seeing some interesting moves in the price of gold with a key factor now behind it.