Despite seeing signs of “growing underlying strength” and diminished downside risk in the economy, members of the Federal Open Market Committee meeting in Washington on Wednesday decided to make no changes to their $85 billion-per-month bond purchase program, and to keep a low federal funds rate of zero to 0.25%.
To Fed watchers, the most notable part of the FOMC statement issued at meeting's end was little mention of the lackluster economic indicators since the September meeting.
“The fact that the statement is so balanced, despite unimpressive data, suggests that they need to leave the options open so they don't box their successors in,” said Robert Tipp, managing director and chief investment strategist at Prudential Fixed Income.
“At their last meeting, they said, 'everything is on hold.' Now there is weaker data but they didn't reference the weaker data, so that could suggest on the margin that they're more likely to taper.”
With Janet Yellen expected to take over as Fed chairwoman in late January, “the implications for us is that we are going to have a few months of uncertainty here until we get an idea of which way she is going to push the committee,” Mr. Tipp said.” I think there is a lot of uncertainty about how different a Janet Yellen Fed would be.”
There will also be at least two FOMC vacancies by the time Ms. Yellen takes over. Board member Elizabeth Duke resigned Aug. 31, and Jerome Powell's term ends in December. Another governor, Sarah Raskin, is being considered for a top Treasury post.