Skip to Content
Stock Analyst Update

Fed Maintains Policy Rate

The release put slowing household spending in the spotlight, supporting the case that the economic picture remains mixed.

There were no surprises as the Federal Open Market Committee (FOMC) voted to maintain its target rate range at 2.25%-2.5% in its third official meeting of 2019. The vote was unanimous. While the last meeting saw the dot plot move in a decidedly dovish direction, the current release and press conference did not represent to us any obvious directional shift. The latest real GDP print of 3.2% for the first quarter of 2019 supports the case that the economy is doing fine, although the release did highlight slowing household spending and business fixed investment, supporting the case that the economic picture remains mixed. Combine this with manageable inflation levels, the PCE Price Index was up only 1.5% for March, and there doesn’t seem to be much to force the Fed’s hand anytime soon. 

Given the current pause, the key debate going forward is over what will cause the next series of hikes or declines, and when? In the current release and the later press conference, not many clues were given. Federal Reserve Chair Jerome Powell simply affirmed that the FOMC is comfortable with its current policy and does not see a strong case for a move in either direction at the moment. If we see a more drastic slowdown in growth and/or changes in unemployment for the worse, this could likely be the driving force behind rate declines. With no inflation pressure, it does not seem the Fed is worried about “not taking away the punch bowl too soon.” In response to questions about inflation potentially being too low, Powell stated that the FOMC believes the current lows are transient, while pointing out that the trimmed mean PCE was coming in at roughly 2%. While the Fed has affirmed that it is committed to its 2% inflation goal, there does seem to be room for maneuvering, depending which inflation metric and/or time period is used. Therefore, we don’t imagine inflation being the main driver of rate hikes or decreases over the medium term, but rather economic growth and employment.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.