No dissents and stability ahead: Morning Brief

Myles Udland
Markets Reporter

Thursday, December 12, 2019

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The Fed finishes 2019 on the same page

The Federal Reserve’s final policy announcement of the decade has come and gone.

On Wednesday, the central bank kept interest rates unchanged, as expected by investors.

And for the first time since May, Fed Chair Jay Powell got all 10 voting members of the Federal Open Market Committee to agree that Wednesday’s decision was the right one.

In each of the last four meetings, at least one member of the FOMC had dissented from the Fed’s policy decision. Kansas City Fed President Esther George and Boston Fed President Eric Rosengren had viewed rate cuts as unnecessary at each of the last three meetings. St. Louis Fed President James Bullard wanted the Fed to lower rates starting in June and called for a 50 basis point cut back in September.

Now, a modestly divided Fed never seemed to bother Powell.

Back in June — when Bullard’s dissent marked the first disagreement of the Powell era — the chair said at a post-meeting press conference that, “thoughtful dissent” is positive for the Fed, adding, “I feel like you make better decisions when you hear a disparity of views. So I really do look at it that way.”

But after four straight meetings with disagreements among FOMC members, the Powell Fed now heads into the New Year with a unified message for the market.

The Federal Reserve Board, including chair Jerome Powell, fourth from left, holds a meeting at the Marriner S. Eccles Federal Reserve Board Building in Washington. (AP Photo/Jacquelyn Martin)

And the message is that rates aren’t going anywhere.

The Fed’s “dot plot” showed on Wednesday that only four of 17 officials offering economic projections see interest rate hikes next year as necessary. This indicates that the Powell Fed at-large has signaled what Bank of America economists call “a long pause.”

“[The] bottom line is the Fed is comfortable with the current stance of policy given its economic outlook and it will take a material reassessment to alter policy,” said BofA economists led by Michelle Meyer.

Now, in the year ahead, there will be changes to the committee, as there are every year.

Loretta Mester of the Cleveland Fed, Patrick Harker from the Philadelphia Fed, Robert Kaplan of the Dallas Fed, and Minneapolis Fed President Neel Kashkari will join the FOMC. They will replace Bullard, George, Rosengren, and Chicago Fed President Charles Evans, respectively.

But with the dot plot and the Fed’s Summary of Economic Projections broadly indicating a reasonable consensus on how the economic outlook will evolve, it seems unlikely new membership on the FOMC would shake up market expectations.

“Powell repeated that changing policy would require a ‘material reassessment’ of the outlook,” said JPMorgan economist Michael Feroli on Wednesday.

“And by all indications the FOMC believes such a reassessment won’t happen for quite some time.”

By Myles Udland, reporter and co-anchor of The Final Round. Follow him @MylesUdland

What to watch today

Economy

  • 8:30 a.m. ET: PPI Final Demand month-on-month, November (0.2% expected, 0.4% in October); PPI excluding Food and Energy month-on-month, November (0.1% expected, 0.3% in October); PPI Final Demand year-on-year, November (1.3% expected, 1.1% in October); PPI excluding Food and Energy year-on-year, November (1.7% expected, 1.6% in October)

  • 8:30 a.m. ET: Initial Jobless Claims, week ended Dec. 7 (214,000 expected, 203,000 prior); Continuing Claims, week ended Nov. 30 (1.678 million expected, 1.693 million prior)

  • 9:45 a.m. ET: Bloomberg Consumer Comfort, week ended Dec. 8 (61.7 prior)

Earnings

Post-market

  • 4:02 p.m. ET: Oracle (ORCL) is expected to report adjusted earnings of 89 cents per share on $9.65 billion in revenue

  • 4:15 p.m. ET: Broadcom (AVGO) is expected to report adjusted earnings of $5.38 per share on $5.73 billion in revenue

  • 4:15 p.m. ET: Costco (COST) is expected to report adjusted earnings of $1.72 per share on $37.30 billion in revenue

Read more

From Yahoo Finance

  • This week’s Influencers with Andy Serwer features model turned magnate, Kathy Ireland, kiWW founder, CEO and chief designer. Watch at 5 p.m. ET or at 8 p.m. ET.

Top News

Saudi Arabia's state-owned oil company Armco and stock market officials celebrate during the official ceremony marking the debut of Aramco's initial public offering (IPO) on the Riyadh's stock market, in Riyadh, Saudi Arabia, Wednesday, Dec. 11, 2019. (AP Photo/Amr Nabil)