Brent gains with Fed's rate pause causing weaker dollar

Chart showing US Federal Reserve interest rates inflation and unemployment rates since 2015

Wall Street futures cautious ahead of FOMC interest rate decision

Federal Reserve Chair Jerome Powell arrives to speak at a news conference after the Federal Open Market Committee meeting, Wednesday, Dec. 11, 2019, in Washington.

In a key change to the policy statement, the FOMC highlighted "global developments and muted inflation pressures" as factors it will be closely monitoring.

The Fed had been expected to leave its benchmark interest rate unchanged this month after cutting it three times this year to shield the economy from slowing global growth and the fallout of US trade conflicts. "With the risks to global growth still to the downside; with inflation still undershooting, not overshooting; and with trade tensions still likely to persist through 2020, we think the bar to cut or to go back to policy easing is lower".

The FOMC repeated in its statement that economic activity has been rising at a "moderate" rate with "solid" job gains.

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The Nasdaq is up 2,018.77 points, or 30.4%.

"What did change was that Fed officials nudged their inflation expectations downwards for next year, as well shifting downwards the rate dot path expectations for both 2020, 2021 and 2022, and it is this it would appear that prompted the USA dollar to weaken, and bond yields to slip back".

In the bank's bull case, gold may rally to a record above $2,000 in 2021 or 2022 given broader official sector buying trends as well as the Fed eventually reverting to the zero lower bound.

Powell again said officials will wait to see the effects of the stimulus provided this year, adding that he expects the current stance to "remain appropriate" until something happens to "materially" change the outlook. The 2-year yield slipped to 1.642%. The long-run unemployment rate was seen at 4.1 per cent, down from 4.2 per cent in the September forecast.

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Fed's great expectations The central bank expects United States growth to hit 2 per cent in 2020 and then cool down slightly to 1.9 per cent in 2021.

Powell will mark his second anniversary as Fed chairman in February.

The move to stand pat comes after three rate cuts earlier this year. grew by 266,000 in November, easily topping a Dow Jones estimate of 187,000. Economists surveyed by Bloomberg expect growth to cool next year but remain near to the long-run trend. The Fed had to cut rates multiple times this year to make up for raising rates too far at the end of 2018, a move that slowed the economy and caused stock prices to drop.

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