The widely expected move falls in line with market expectations as the Fed has signaled it plans to move into an extended pause as it watches to see how the US economy evolves.
But Powell said during a press conference Wednesday that he doesn’t think rates need to rise anytime soon. He said the Fed can hold rates steady, because historically unemployment has been able to remain at very low levels for an extended period of time without having an effect on inflation.
The stock market turned positive when Powell suggested rates don’t need to go up. The Dow had spent the entire day in the red before Powell’s comments.
Since the last Fed meeting in October, the Fed chief and his colleagues have been making the case that monetary policy is in a “good place” and probably won’t change for some time unless there is some “material” change.
Powell has pointed to sluggish global growth and persistent trade uncertainty as two threats to the US economy.
For the year, the Fed maintained its outlook for the US economy, which it expects to grow at 2.2%, and then slow down to 2% next year.
Powell recently described the US economy as a “star performer” and expressed confidence that the expansion can be extended thanks to strong consumer spending and steady job growth.
Following November’s stronger-than-expected jobs report, the Fed also now anticipates the country’s unemployment rate to be slightly lower for the year at 3.6%. Policymakers had previously forecast in September the jobless rate landing at 3.7%.