Fed's rate freeze in line with market expectations: BOK

Andrew Cummings
December 12, 2019

Treasury yields fell across the curve, with benchmark 10-year rates dropping roughly 5 basis points to 1.79%. While this isn't the Fed's preferred inflation measure, we think it still helps that it's not that low, supporting a "no more rate moves for now" base case in 2020.

There were no dissents to the policy statement, the first without opposition since the 30 April - 1 May meeting.


President Trump has suggested he is prepared to wait until after next year's election to conclude a deal while it remains unclear as to whether the proposed tariff hikes on US$155bn of consumer goods imports from China will go ahead on Sunday as planned.

Compared to the 1990s, he said, when the Fed cut rates as an insurance policy against a recession and then raised them again to prevent a tight labor market from fueling unwanted price rises, today "the need for rate increases is less".


The decision, though widely expected, is unlikely to please President Donald Trump who has repeatedly berated the Fed and called on its Chairman Jerome Powell to slash rates to zero to supercharge the U.S. economy, which Trump says is at a disadvantage against foreign economies with lower rates.

Policymakers wrapped up their two-day meeting on Wednesday. In a slightly hawkish lean however, they also removed their comment from the previous meeting's statement that "uncertainties about this outlook remain". Australian shares were down 0.29 percent, however, weighed by the energy sector after the fall in oil prices.


The Fed's forecasts offered little obvious fodder for either Democrats or Republicans, with the economy largely seen performing as it has - far short of the 3% annual growth Trump promised to produce, but also with historically low rates of unemployment.

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