KEY MESSAGES
We expect the FOMC to hold rates steady and project a continued pause at its last meeting of 2019. We see the Committee’s median rate projection remaining on hold through 2020, with few major changes to the statement or economic forecasts. We think the Committee will be split in terms of how long to hold rates steady, with ten participants expected to project rates on hold versus seven projecting them higher by end-2020. We continue to expect the pace of hiring to slow materially and compel the Fed into 50bp of further
easing in H1 next year.
October’s pause likely to remain intact in December The FOMC signaled an end to its insurance cutting cycle at its October meeting, predicating further accommodation on a
“material reassessment” of its outlook. Since that meeting, data and events have not evolved in such a way to constitute such a reassessment.
On the data front, while manufacturing sector and business sentiment indicators continue to show softness, labor market outcomes have improved since the Committee’s last two
meetings, with job gains, participation, and wage growth all higher. On the events front, both the UK election and 15 Dec List 4B tariff deadline will follow the FOMC’s December meeting.
Still, the Committee’s assessment of an improved risk profile likely remains appropriate, as does its view that risks still remain elevated and skewed to the downside. As a result, we see little reason to think the Committee will deviate from its position that policy is in a “good place” and likely to “remain appropriate” if the economy evolves in line with its expectations.