US Federal Reserve won't raise interest rates

The US Federal Reserve has decided to leave interest rates unchanged at 2.25-2.5%. The decision echoes predictions about the Fed's decision on interest rates in 2019. The Fed chair, Jerome Powell, said that the US Central bank will be 'patient' before implementing more interest rate increases. The Dow Jones soared after the news.

Why didn't the Fed raise interest rates?

The Federal Reserve chose to leave interest rates unchanged because of the current global economic situation. After the Federal Open Market Committee (FOMC) meeting, the Fed decided that it will monitor the markets before implementing rate hikes.

'In light of global economic and financial developments and muted inflation pressures, the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes,' said the FOMC in a statement.

While it was expected that the Fed would raise rates in 2019, Powell noted that he didn't see a need for raising interest rates because of a strong US economy.

'The case for raising rates has weakened somewhat,' said Powell.

Powell also stressed that the US central bank will change the balance sheet when necessary.

He noted that the Federal Reserve 'intends to continue to implement monetary policy in a regime in which an ample supply of reserves ensures that control over the level of the federal funds rate and other short-term interest rates is exercised primarily through the setting of the Federal Reserve’s administered rates, and in which active management of the supply of reserves is not required'.

Did Trump and the markets affect Fed decision?

US President, Donald Trump, has been highly critical of the Fed's decision to raise rates in 2018. The Dow Jones plummeted as a result, and Powell later said he would watch the markets before implementing rate changes. Powell denies that Trump influenced his decision.

'What we care about, and really the only thing we care about at the Fed, is doing our job for the American people and using our tools. We're always going to do what we think is the right thing, we're never going to take political considerations into account or discuss them as part of our work. We're human, we make mistakes, but we're not going to make mistakes of character or integrity. I wouldn't want the public to know that and I wouldn't want them to see that in our actions', said Powell.

Will the Fed remain dovish?

This latest decision by the Fed to leave rates unchanged could signal a dovish approach to interest rates in the new year. Investors will continue to watch to see what actions the Fed takes next and how it affects the markets.