WASHINGTON: The U.S. Federal Reserve holds its last policy meeting of 2019 on Wednesday, having completed a year-long U-turn that saw it abandon a tightening cycle and lower borrowing costs three times in response to the global trade war.
Having pulled rate expectations down steadily since then, Fed policymakers are likely to repeat and perhaps intensify the message sent in late October, when borrowing costs were last reduced, that only a"material" shock to the economy - for good or for ill - would prompt them to alter rates again. Policymakers also came to terms with the fact that a startlingly low U.S. unemployment rate of 3.5per cent can apparently coexist with tame inflation. That contradicts the common assumption that tight labor markets cause prices to rise, and made the Fed more comfortable reducing interest rates without fear of laying the groundwork for future problems.
It will be an important signal not just for markets, but also for Trump and Democratic presidential hopefuls wondering if they will be campaigning in an economy that is growing, stumbling, or muddling along.
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