Amid Cloudy Outlook, Fed Keeps Rates the Same

David Deem

By Suzanne De Vita

Amid graying economic factors and global tension, the Federal Reserve left rates the same on Wednesday, aligning with the broad consensus, but, importantly, leaving open the possibility of a rate reduction.

"The [Federal Open Market] Committee continues to view sustained expansion of economic activity, strong labor market conditions and inflation near the Committee's symmetric 2 percent objective as the most likely outcomes, but uncertainties about this outlook have increased," according to the Federal Reserve's statement.

In considering cutting interest rates, the Fed is hoping to keep momentum strong. In March, the agency indicated an intent to postpone raising rates this year, chiefly due to inflation lingering short of its target. In May, employment gains and pay stagnated—but, with historically low unemployment, as well as other encouraging indicators like spending, there are fair odds of routing a slowdown, analysts say.

A determining factor is the trade war, which has come to a head in recent weeks. President Trump and China's President Xi have agreed to resume talks, and are expected to meet next week, during the G20 Summit. According to experts at Freddie Mac, the dispute has driven a drop in long-term mortgage rates, which are averaging 3.82 percent (at press time).

Fluctuations, however, are largely moved by treasury yields. In a Freddie Mac forecast released this week, analysts anticipate an average 4.1 percent, 30-year rate for the year, and an average 4.2 percent 30-year rate in 2020.



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