Arguably one of the most important events today will be the policy meeting of the Federal Reserve in the United States. This will be the central bank’s last formal gathering for 2019 and a chance to offer insights into its plans for 2020.
This year, the Federal Reserve surprised investors by becoming more adaptable in the way it responds to economic data. After spending an entire decade gradually tightening interest rates to respond to booming economic growth in the United States, the Fed chose to soften its policy and lowered interest rates on three separate occasions in 2019. This was a response to slowing growth, resulting from the United States’ prolonged trade conflict with China.
For today’s meeting, it is expected that the Federal Reserve will not make any changes. The previous rate decreases were already preventative, so the bank likely sees the economy as having enough breathing room.
Looking to 2020, investors expect that the Fed will remain cautious. It is too early to tell, as the bank’s approach will depend on next year’s fundamentals, but most probably we won’t see big changes in the next year. Moreover, there are Presidential elections in November 2020, so politics might dominate the markets in the second half of the year, further encouraging the Federal Reserve to wait.
