FOMC Sets the Table

The Federal Reserve Open Market Committee (FOMC) issued a succinct statement following the November meeting. The FOMC statement did little more than affirm the continued labor market improvements and ongoing economic strength. The goal was pretty clear: Set the stage for a December rate hike without grabbing headlines and rattling markets today. The Fed succeeded.

The more interesting intelligence will show up in the minutes, which will be released in three weeks. Look for substantial debate on the effects of tariffs on supply chains. The regional Fed presidents are particularly close to this issue. Firms are feeling the pinch of tariffs and scrambling to deal with disruptions to supply chains, which are adding inflation to the pipeline. The FOMC is also expected to discuss the amount of bank reserves to keep on the balance sheet. We expect the Fed to keep the holdings at a high level.

This is the last meeting without an accompanying press conference. Holding a press conference after every meeting will give the Federal Reserve more flexibility to move at every meeting. Those hoping for more real-time information on what was actually discussed at the meeting could be disappointed. Fed Chairman Jay Powell has proven himself extremely savvy in not answering politically charged questions. The Fed is already in the political crosshairs for raising rates. There is no reason for the Chairman to make that target easier to hit. As a result, the minutes are likely to remain the key to understanding the spectrum of the debate for some time to come.

Bottom Line
The FOMC stayed below the radar in what has already been an extremely packed week for news. The statement was short but affirmed the economy’s strength and left the door open for a rate hike in December.

It is important to remember that Congress, not the White House, oversees the Federal Reserve. Chairman Powell has shaken a lot of hands to make friends with both parties on Capitol Hill. This has paid off and should allow him to keep the Fed independent of political interference, at least for now.

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