After its Thursday meeting, the Federal Reserve is keeping its rates steady for the month of November, allowing investors to breathe a collective sigh of relief. While it is expected that there will be a rate hike in December, stability for the time being should help the markets to recover after a highly volatile October.
Benchmark Rate Remains
The Federal Reserve came out of its Thursday meeting with a benchmark rate target of 2% – 2.25%. This should keep lending rates constant throughout November and early December.
In a statement published by the Board of Governors of the Federal Reserve System on Thursday, the central bank noted that “the labor market has continued to strengthen”, and “economic activity has been rising at a strong rate.” When providing context for its latest report, the Fed noted a decline in the unemployment rate, an increase in consumer spending, and growth across the business sector. The Fed did note that while business is strong, the rate of fixed investment has become more moderate compared to recent months.
Good news for consumers is that inflation has remained manageable at 2%, even for volatile items like energy and food. The Fed indicated that expectations for inflation in the long term are unchanged.
How the Federal Reserve Rate has Evolved in the Last Two Years
Rate increases keep expansion at a manageable level to avoid overheating the economy and triggering a recession. While rates have increased consistently over the last two years, the decrease in unemployment and the growth in real income has helped to keep things balanced for consumers, investors, and businesses.
Here are all target rates since December 2016:
- December 14, 2016: 750 %
- March 16, 2017: 000 %
- June 14, 2017: 250 %
- December 13, 2017: 500 %
- March 21, 2018: 750 %
- June 13, 2018: 000 %
- September 26, 2018: 250 %
Fed Makes No Mention of Volatility
As it stands today, the Fed is likely to make one more adjustment in December this year, followed by at least two adjustments in 2019. Federal rates are still nowhere near the last peak of 5.25% in 2006. Both consumers and investors will enjoy a stronger economy, and with the midterm elections out of the way, the market is already looking relatively healthy for the rest of the year.
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