Fed left federal funds rate unchanged at 1.50-1.75% as widely expected. The decision was made by unanimous vote, with no dissent. Fed sounds cautious as “business fixed investment and exports remain weak”, with inflation running below target and market-based measures of inflation compensation remain low. Nevertheless, “current stance of monetary policy is appropriate”.
In the new economic projections, GDP forecasts were left unchanged. Unemployment rate projections were lowered to 3.5% in 2020, 3.6% in 2021 and 3.7% in 2022 respectively. Core PCE inflation projections were also left unchanged for 2020, 2021 and 2020.
Federal funds rate projections revised lower as expected. Most importantly, median projections show federal funds rate at 1.6% in 2020, that is, no more rate cut next year. Then, interest rate will climb to 1.9% (one hike) in 2021 and 2.1% (another hike) in 2022. But rates will stays below the longer run average of 2.5%, which is unchanged from September estimation.