Patience

By Isaac Cohen*


Consistent with the statements made by several members, last week, the Federal Reserve Open Market Committee decided to leave the interest rate on federal funds unchanged, within a range of 2.25 to 2.50 percent. In its own words, “in light of global economic and financial developments and muted inflation pressures, the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate.”
https://www.federalreserve.gov/newsevents/pressreleases/monetary20190130a.htm
The markets recognized the signal by posting the best January in 30 years, after the fourth quarter fall of last year.
During the subsequent press conference Federal Reserve Chairman Jerome Powell clarified some of the reasons which led to the decision to be patient. First, he described “cross currents and conflicting signals,” such as the slowdown in Europe and China and uncertainties, including Brexit, trade tensions and the government shutdown in the United States. Second, Chairman Powell said “inflation readings have been muted, and the recent drop in oil prices is likely to push headline inflation lower.” These are the conditions which allow for “a patient, wait-and-see approach regarding future policy changes.”
https//www.federalreserve.gov/newsevents/FOMCpresconf20190130-2.htm
However, to complicate the outlook, last Friday the Labor Department on Friday announced vigorous job creation in January, at 304,000 new non agricultural jobs, with the unemployment rate increasing slightly, to 4 percent. If such strength turns into a trend, the central bank’s recently announced patience will soon be tested.


*International analyst and consultant, former Director ECLAC Washington. Commentator on economic and financial issues for CNN en Español TV and radio, UNIVISION, TELEMUNDO and other media.

About Ramón Jiménez

Ramón Jiménez, Managing Editor de MetroLatinoUSA.Com (MLN). Graduado de la Escuela de Periodismo de la Universidad del Distrito de Columbia (UDC). Email: [email protected]

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