United States Monetary Policy November 2018

United States

United States: Federal Reserve stands pat in November and remains on track for December hike

November 8, 2018

At its 7–8 November monetary policy meeting, the Federal Reserve’s Open Market Committee (FOMC) unanimously decided to maintain its target range for the federal funds rate at between 2.00% and 2.25%. The move was widely expected by market analysts, most of whom see the next rate hike occurring at the following meeting, scheduled for 18–19 December.

The November meeting was largely uneventful and seemed to confirm predictions that the Fed will hike rates in December. This was highlighted by the continued emphasis on the strength of economic momentum—particularly in the labor market amid a nearly 50-year low unemployment rate—and considering inflation dynamics remained within the Fed’s target range. Noticeably, the communiqué did not reference the tumble observed in stock markets in October, signaling the Fed was not exceedingly concerned with increased financial volatility. However, the November statement did acknowledge that “growth of business fixed investment has moderated from its rapid pace earlier in the year”.

Although this month’s meeting did not reveal much novel information, several conferences and interviews given by Fed Chairman Jerome Powell in October provided additional insight into the FOMC’s thinking regarding the path of macroeconomic developments in the future.

Indicating that upside surprises in wage growth in coming months will be unlikely to turn the Fed more hawkish, Powell stated:

“We have seen a gradual increase in wages. And my own expectation would be that we would continue to see some of that. And it would be quite welcome. We don’t think that we’re in particularly imminent danger of a situation where wage increases are going to promote price inflation.”

Moreover, signaling that the Fed still sees ample room to increase rates and will most likely remain on track with regular hikes in the coming quarters, Powell said:

"Interest rates are still accommodative, but we’re gradually moving to a place where they’ll be neutral. We may go past neutral, but we're a long way from neutral at this point, probably.”

The U.S. Federal Reserve’s median interest rate projection for 2019 is 3.25%, indicating four more interest rate hikes between now and the end of 2019. Our panel expects the federal funds rate to end 2019 at 3.16%. For 2020, FocusEconomics panelists see the federal funds rate ending at 3.08%.


Author:, Economist

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USA Monetary Policy November 2018

Note: Total assets on the balance sheet of the Federal Reserve in USD billion and Federal Funds Target Rate in %.
Source: Federal Reserve


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