FOMC Meeting: Key Takeaways

Wells Fargo Investment Institute shares its key takeaways from the Federal Reserve’s decision to leave interest rates unchanged.

FOMC Meeting: Key Takeaways

November FOMC Meeting | November 8, 2018

Policy Announcement

The Federal Open Market Committee (FOMC) decided to maintain the current range for the federal funds target rate at 2.00%-2.25%. The FOMC reiterated that it expects economic conditions to evolve in a manner that will warrant gradual increases in the federal funds rate. The Federal Reserve (Fed) will continue reducing Treasury-security purchases by $30 billion per month and mortgage-backed-security purchases by $20 billion per month.

The vote was unanimous to keep the fed funds target rate unchanged.

The phrase “monetary policy remains accommodative” has been removed, suggesting that the Fed views monetary policy as neither accommodative nor restrictive at current levels.

We believe that investors should consider favoring the short part of the yield curve to mitigate interest-rate risk and to benefit from additional income potential as the Fed continues its current path of rate hikes.

TopicDetails
Stated Reasons

Job gains have been strong, while the unemployment rate has declined.

Household spending has continued to grow strongly, while business fixed investment growth moderated from its strong growth earlier in the year.

Core inflation remains near 2%, and longer-term inflation expectations are little changed.

Looking Forward

Inflation (excluding food and energy prices) has moved to the Fed’s 2% objective. The committee expects inflation to run near its 2% symmetric target over the medium term.

The FOMC expects that further gradual increases in the federal funds rate will be consistent with sustained expansion of economic activity, strong labor-market conditions, and inflation near the 2% objective.

Risks to the economic outlook appear roughly balanced.

What Else?

The Fed continued to describe the path of future rate hikes as “gradual.” We expect a rate hike at the December meeting and continued gradual rate hikes next year. Our current outlook is for three additional rate hikes over the next 12 months.

The vote was unanimous to keep the fed funds target rate unchanged.

We believe that investors should consider favoring the short part of the yield curve to mitigate interest-rate risk and to benefit from additional income potential as the Fed continues its current path of rate hikes.

Upcoming Meeting ScheduleDecember 19* | January 30 | March 20* | May 1

* Indicates the meeting is associated with a summary of economic projections. Beginning in 2019, every meeting will be accompanied by a press conference.

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