Updated Jan 29, 2020

Federal Reserve leaves interest rates on hold

Jerome Powell. Photo: Sarah Silbiger/Xinhua via Getty

The Federal Reserve said on Wednesday that interest rates would remain between the target range of 1.5% and 1.75%.

Why it matters: Fed chair Jerome Powell said developments in the global economy since the last Fed meeting — namely threats posed by the coronavirus outbreak — have not changed the central bank's wait-and-see approach.

What he's saying: "It’s very uncertain ... how far [the coronavirus] will spread and what the macroeconomic effects will be," Powell told reporters at a press conference.

  • Companies are closing China-based stores, while automakers are extending factory closures in China in response to the outbreak. Powell noted there will be "implications in the near-term" for China's economy.

The big picture: As risks like Brexit and a full-on trade war have abated, Powell said there is room for "cautious optimism about outlook for the global economy."

  • In its closely watched policy statement, the Fed downgraded its characterization of U.S. consumer spending to "moderate" from "strong." Powell remained optimistic about the labor market, which has continued to pump out consistent job gains.

What's new: The Fed also announced it would continue to intervene with cash injections "at least through April" to prevent any flubs in money markets.

  • Market-watchers have cited these moves, along with the Fed's Treasury-bill purchases, as a key reason for the stock market's strength.
  • Powell said "many things affect markets," but the Fed's intention with the current program is more technical and not meant to provide stimulus.

The bottom line: The Fed is confident the economy is in a good place. Powell hinted that the current interest rate level is here to stay and only a drastic shift in economic conditions would change that view.

  • This is despite pressure from President Trump, who this week continued attempts to goad the Federal Reserve into further lowering rates.

Go deeper:

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The Fed confronts the coronavirus risk

Illustration: Aïda Amer/Axios

What was going to be a very simple and straightforward policy meeting for the Fed this afternoon has been significantly complicated by the outbreak of the Wuhan coronavirus, fresh geopolitical tensions and an inverted yield curve.

The big picture: While no policy change is expected, all eyes will be on Chairman Jerome Powell's assessment of the economic environment and whether the U.S. central bank is leaning toward adding more stimulus or taking away the punch bowl.

Go deeperArrowJan 29, 2020

Judy Shelton vs. Fed independence

Illustration: Aïda Amer/Axios

President Trump hasn't given up on his dream of politicizing the Fed. After failing to get Herman Cain and Stephen Moore onto the Fed's board of governors, his latest candidate is one of his former campaign advisers, Judy Shelton, who testified in front of the Senate Banking Committee today.

Why it matters: Shelton is no more qualified to sit on the Fed board than Cain or Moore. But she's already further along in the process than either of them ever managed.

The Fed may be setting the table for 2020 rate cuts

Illustration: Sarah Grillo/Axios

The Fed looks to be laying the groundwork to lower U.S. interest rates this year, just as they did in April 2019 before cutting rates in July, September and October.

Why it matters: A Fed rate cut makes taking on debt more attractive for U.S. consumers and businesses, helping to juice the economy, but also puts the central bank in a weaker position to fight off a potential recession.