Fed Interest Rate Decision (March 2019)


Posted on: 2019-03-20 (Day) By BCR Market Event


 

The Fed held its interest rate at 2.5% as widely expected during the meeting in January 2019. The FOMC stated that Economic activity in the US appears to have increased at a solid pace, and the labour market strengthened further. Inflation has been near the FOMC longer-run objective of 2%. Even though, the FOMC indicated at its January meeting that it will be patient as it determines what future adjustments to the federal funds rate may be appropriate to support the Committee's congressionally mandated objectives of maximum employment and price stability.

Fed Interest Rate (%)

 

U.S. Interest Rate Announcement History

Date (GMT)                                       Previous              Consensus          Actual

20 Mar 2019                                     2.5%                     2.5%

30 Jan 2019                                      2.5%                     2.5%                    2.5%

19 Dec 2018                                     2.25%                   2.5%                    2.5%

08 Nov 2018                                     2.25%                   2.25%                 2.25%

26 Sep 2018                                     2%                         2.25%                 2.25%  

01 Aug 2018                                     2%                        2%                       2%

13 Jun 2018                                      1.75%                  2%                       2%

02 May 2018                                    1.75%                  1.75%                  1.75%

21 Mar 2018                                    1.5%                     1.75%                  1.75%

31 Jan 2018                                      1.5%                    1.5%                    1.5%

 

 

Opportunities can be found in the statement

 

Inflation Rate

Consumer price inflation, as measured by the 12-month change in the price index for personal consumption expenditures, moved down from a little above the FOMC's objective of 2 percent in the middle of last year to an estimated 1.7 percent in December, restrained by recent declines in consumer energy prices. The 12-month measure of inflation that excludes food and energy items (so-called core inflation), which historically has been a better indicator of where overall inflation will be in the future than the headline measure that includes those items, is estimated to have been 1.9 percent in December--up 1/4 percentage point from a year ago. Survey-based measures of longer-run inflation expectations have generally been stable, though market-based measures of inflation compensation have moved down some since the first half of 2018.” Referring to Fed’s Monetary Policy Report.

The U.S. annual inflation rate fell to 1.5% in February of 2019 from 1.6% in the prior month, and below market expectations of 1.6%. The inflation rate hits a 30-month low. A sharp decline can be found in the figure. However, it remains relatively high within the decade.

U.S. Inflation Rate (%)

 

Jobs Report

The labor market has continued to strengthen since the middle of last year. Payroll employment growth has remained strong, averaging 224,000 per month since June 2018. The unemployment rate has been about unchanged over this period, averaging a little under 4 percent--a low level by historical standards--while the labor force participation rate has moved up despite the ongoing downward influence from an aging population. Wage growth has also picked up recently.” Referring to Fed’s Monetary Policy Report.

A better-than-expected jobless rate in the U.S. announced at 3.8% in February 2019 from 4% in the previous month. Meanwhile, the number of unemployed persons decreased by 300K to 6.2M. This decline reflects the return of the federal workers were furloughed in January due to the partial government shutdown.

U.S. Unemployment Rate (%)

 

GDP

Available indicators suggest that real gross domestic product (GDP) increased at a solid rate, on balance, in the second half of last year and rose a little under 3 percent for the year as a whole--a noticeable pickup from the pace in recent years. Consumer spending expanded at a strong rate for most of the second half, supported by robust job gains, past increases in household wealth, and higher disposable income due in part to the Tax Cuts and Jobs Act, though spending appears to have weakened toward year-end. Business investment grew as well, though growth seems to have slowed somewhat from a sizable gain in the first half. However, housing market activity declined last year amid rising mortgage interest rates and higher material and labor costs. Indicators of both consumer and business sentiment remain at favorable levels, but some measures have softened since the fall, likely a reflection of financial market volatility and increased concerns about the global outlook.” Referring to Fed’s Monetary Policy Report.

The annual GDP growth in the U.S. expanded 3.1% in the Q4 2019, the data is formed an upward trend since Q2 2016. With a strong job market, inflation close to the objective and a bulk growth of GDP, “FOMC believes that the best way forward is to keep gradually raising the federal funds rate”. 

U.S. GDP Annual Growth Rate (%)

 

Technical View

The Dollar Index (DXY) gapped over the weekend as disappointing U.S. CPI data announced. Currently, the price is heading South to testing 95.70 support level. In the 4 hours timeframe, indicators are getting stronger in the bearish territory for both MACD and RSI. The price breached the upward channel as showed in the chart. As 97.70 level became a massive barrier in the 4 hours chart, focus on 95.70 support level for the next move, any breakthrough of the support level will lead the dollar heading South to 94.86 which is the next support level.

USD Index H4 Chart