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January 30, 2019 FOMC statement mildly more dovish on the labor market and inflation, but risks appear heightened

Changes in the FOMC meeting statement of January 30 were relatively small in regard to the assessment of the labor market and inflation. The labor market “continued to strengthen” and economic activity was described as “solid”, a slightly softer nuance to the “strong” in the December 19 statement. There was a slightly more cautionary note to the downside regarding inflation expectations as reflected in market-based measures of inflation compensation, however, with consumer inflation expectations “little changed”, it should not be overthought.

The language regarding the rate decision and the risks to the outlook saw some obvious alteration in that the FOMC “decided to maintain” rates after the December hike to 2.25%-2.50% for the fed funds rate target range.  The tone of assessing the risks to the outlook used the recent watchword of “patient”  and suggested that the risks are no longer viewed as balanced, although the bias is for “sustained economic activity”, labor market strength, and inflation near the 2% symmetric objective as “the most likely outcome” and that patience can be exercised in “future adjustments” to short-term rates “In light of global economic and financial developments and muted inflation pressures.”

The tone of the statement was much as expected and will keep anticipation of the next rate action more distant. There were no dissents in the vote.

Text of January 30 FOMC statement.

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