Investment Manager Research
In Focus: Fed Holds Steady, As Expected
This week Federal Open Market Committee (FOMC) participants left the target federal funds range unchanged at 1.50 – 1.75 percent at its December meeting. A mix of strong labor conditions continued weakness in business investment activity and sluggish global growth did not warrant policy change.
The Committee still expects U.S. economic growth to slow but stabilize near 2.0 percent in 2020. Fed officials reiterated expectations for inflation to approach 2.0 percent as strength in the labor market flows through economic channels. In his press conference, Chairman Powell said the Fed would have to observe “a significant and persistent” increase in inflation to raise rates. While monetary policy remains data-dependent, the Fed’s baseline forecast is to leave its policy rate unchanged through 2020.
Market participants who hoped for dialogue about the Fed’s role in the repo market during the press conference were disappointed. Chairman Powell reiterated that Fed officials believe the current monetary policy mix is sufficient to prevent year-end repo market funding stress. However, he acknowledged they stand ready to increase the size and scope of balance sheet accommodation if necessary.
Get the latest research directly to your inbox. Subscribe to our DiMeo Schneider Insights today.
View Related Insights
Breaking the Rules in Fixed Income Index Construction
As fixed income markets evolved over the last cycle, we extensively examined and analyzed new risks present in benchmarks with …
Fixed Income | Investment Manager Research
2020 Second Quarter Considerations
Quarterly Considerations Retirement Plans The DOL released a proposed regulation pertaining to a fiduciary’s duties when investing in ESG investments …
Investment Manager Research | Quarterly Considerations