Fed holds steady, signals no interest rate changes through 2020

The Federal Reserve left its benchmark rate unchanged on Wednesday and signaled it plans to hold steady through 2020, barring unexpected economic news.

All the members of the Federal Open Market Committee supported the decision to keep the rate in the 1.5% to 1.75% range, the first unanimous vote since its May meeting.

“The committee judges that the current stance of monetary policy is appropriate to support sustained expansion of economic activity, strong labor market conditions, and inflation near the committee’s symmetric 2% objective,’’ the FOMC said in a statement.

The Fed’s new forecasts, released at the end of the meeting, showed a majority of FOMC members expect no change in interest rates through 2020, a year that will see a presidential election.

Only four members of the committee, out of 17, predicted a higher rate next year. Their forecast was just one increase.

While the Fed doesn’t directly control home-loan rates, its decisions and forecasts influence the bond investors who do. If investors are willing to accept lower yields, that translates into lower mortgage rates.

The fallout from the U.S.-China trade war has been an overriding concern for Fed policymakers, who blamed it for slowing the economy. Fed Chairman Jerome Powell cited the issue at his post-meeting press conference, using one of the Fed-speak terms for it: “trade developments.”

“Business investments and exports remain weak, and manufacturing outlook has declined over the past year,” Powell said. “Sluggish growth abroad and trade developments have weighed on those sectors.”

Powell began his press conference with a nod to former Chairman Paul Volcker, who died on Sunday. Volcker was known for stubbornly holding to an unpopular course, beginning in 1979, that ended high inflation and laid “the foundation for the prosperity and price stability we enjoy today,” Powell said.

Powell, like his predecessors, speaks in muted tones, but in his praise for Volcker, his defense of the independence of the central bank was clear:

“What is perhaps most admirable about him, more than his many accomplishments, was his character,” Powell said. “With courage, integrity, and tenacity, he always pursued the policies that he believed ultimately would benefit all Americans. My colleagues and I continue to draw inspiration from his example.”

Earlier in the day, the Financial Times published a new afterword to the 2020 paperback edition of Volcker’s autobiography, originally published in 2018, that called out President Donald Trump for his attacks on the Fed.

This year, Trump has said on Twitter that Fed members are “boneheads” who “don’t have a clue,” and cited Powell as being an “enemy” of the U.S. because of a refusal to bend to the president’s demand for sub-zero rates.

Volcker wrote: “When I was writing my book, I observed that President Donald Trump had not attacked the independent U.S. Federal Reserve, for which I was grateful. To say that is no longer true would be an understatement.”

He continued: “Not since just after the second world war have we seen a president so openly seek to dictate policy to the Fed. That is a matter of great concern, given that the central bank is one of our key governmental institutions, carefully designed to be free of purely partisan attacks. I trust that the members of the Federal Reserve board itself, the members of Congress responsible for Fed oversight, and indeed the public at large, will maintain the Fed’s ability to act in the nation’s interest, free of partisan political purposes.”

Trump posted more than a dozen tweets and re-tweets in the hours before the Fed meeting without mentioning the topic.