Marketplace Surprised by a More Aggressively Dovish Federal Reserve Monetary Policy

Posted on 03/20/2019 1:29 PM

The Federal Open Market Committee (FOMC) meeting of the Federal Reserve that began Tuesday morning and ended this afternoon with a statement revealed a Fed that has taken another surprisingly strong step in the direction of easier U.S. monetary policy. The FOMC statement said the Fed would keep U.S.

interest rates unchanged and plans no more rate hikes this year.

The Fed will also taper its balance sheet runoff starting in May and end it in October. Beginning in October, the Fed plans to reinvest mortgage-backed securities into U.S. Treasuries.  Those moves are ostensibly a move toward easier U.S. monetary policy.

The FOMC statement also said the U.S. labor market remains strong but U.S. economic growth has slowed a bit, as evidenced by slower household spending and lower business investment.

FOMC members said inflationary pressures have eased, mostly due to lower energy prices.

The U.S. stock indexes made advances on the unexpectedly dovish Fed statement. The U.S. dollar index sold off and hit its daily lows on the Fed news.

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