- Summary:
- The FOMC has left interest rates unchanged at 1.75%. GDP and inflation forecasts by the Fed are also unchanged. US Fed Chair to meet the press.
As expected, the FOMC left its Fed Funds Rate unchanged at 1.75%. This was already priced in b the markets to the tune of 97.5%, so this decision did not create any surprises in terms of price movements of the critical assets directly linked to the decision.
Inflation and GDP Forecasts Left Intact
The key takeaway from the FOMC’s decision are its projections for inflation and GDP, usually released once every 2 meetings. Here are the projections as released with the statement on the interest rate decision.
- Median view of appropriate fed funds rate at the end of 2019 is at 1.6% (previous 1.9%).
- Median view of fed funds rate at the end of 2020 is at 1.6% (previous 1.9%).
- Median view of fed funds rate at the end of 2021 at 1.9% (previous 2.1%).
- Median view of fed funds rate at the end of 2022 at 2.1% (previous 2.4%).
- Median view of fed funds rate in the longer run at 2.5% (previous 2.5%).
- Median forecast of Fed policymakers is for no change in rates in 2020, 13 of 17 see rates unchanged, four see one rate hike.
- Median forecast of Fed policymakers is for one rate hike in each 2021 and 2022 but individual forecasts vary widely.
What is the Market Reaction So Far?
With a few minutes to go until Fed Chair Jerome Powell takes the stage in the press conference, gold (XAUUSD) is making a nice move up and is trading at 1472.59 and is approaching a critical resistance at 1475.53. A break above this level could open the door towards the 1493-1497 price band. Further support lies at 1518.51, the site of previous highs of October 3 and 25.
Failure to break above 1475.53 could reopen the pathway to retest the previous support areas at 1462 and 1448 (Nov 12 lows).
More action to come from the US Fed Chair’s press conference.