MONEY MARKET | December 2019

Taxable money market

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Patricia Larkin

Chief Investment Officer,
BNY Mellon CIS

The November jobs report was a blockbuster, with the U.S. economy generating an estimated 266,000 new jobs during the month and the unemployment rate ticking down to 3.5%. There were also positive figures on the wage front with average hourly wages increasing by 3.2% on a year-over-year basis.

The good news on the employment front helped assuage fears that the longrunning expansion was losing steam. The American consumer continued to lead the way with a 2.9% increase in personal consumption, the primary factor in the 2.1% increase in GDP during the third quarter.

At its final meeting of the year, the Federal Reserve (the “Fed”), as expected, made no change in interest rates. In a unanimous vote, members of the Federal Open Market Committee indicated that they believed rates were “appropriate” for current economic conditions. Furthermore, in their individual projections for the next several years, policymakers saw no change in rate policy for the entire year of 2020 and only one 25-basis-point increase in both 2021 and 2022.

In his post-meeting press conference, Fed Chair Jerome Powell did give the Fed significant leeway by saying Fed officials would respond in case of a material reassessment of economic conditions. This allows them to take stock of any potential trade deals as well as financial and economic situations throughout the rest of the world.

As we enter a presidential election year, in what promises to be a bruising political environment, the Fed clearly hopes that both the U.S. and world economies perform well enough to keep them out of the headlines. Time will tell if the Fed’s Christmas wish comes true.

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