As Expected, The Federal Reserve Leaves Rates Unchanged

By Tom Burnett, CFA

On Wednesday, January 29, 2020, the Federal Reserve concluded its two-day meeting with a formal announcement that it would not be changing the Fed Funds rate. The target rate remains a range of 1.5% to 1.75%. The Fed’s formal policy statement noted that inflation was low and economic growth ‘moderate’. It is important to note that rates have come down sharply from a year ago. For example, one year ago, the rate on the 10-year Treasury Note was 2.71%. It is currently trading at a yield of just 1.61%. Similarly, the 30-year bond was yielding 3.04% a year ago, compared to 2.06% following the Fed announcement. As a reminder, the Fed raised rates four times in 2018 and cut them three times in 2019. The current policy appears to be ‘steady as she goes’ with no dramatic moves expected over the next few months

. Interest rates remain negative in many countries (Germany, Japan, and France) so there is a large demand for US Treasury securities since yields, while historically low, are still positive.

Tom Burnett, CFA is Director of Research