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by Tiziana Di Giovannandrea 11 December 2019The Federal Reserve, the US central bank, has decided to leave interest rates unchanged at its last meeting of the year and the last of the decade. The cost of money remains unchanged between 1.5% and 1.75%. In 2019 the Fed cut rates three times, with reductions each time from a quarter point.

In the meeting of its decision-making body, the FOMC commission (Federal Open Market Committee), in addition to expressing itself on interest rates, has also updated the forecasts on GDP and inflation.

Jerome Powell, president of the Fed, at the press conference stated that the US economic outlook remains favorable and the Fed is "strongly committed to achieving the objective of a 2% symmetrical inflation ". Although "bringing inflation to 2% was a challenge" because "it was very difficult to bring inflation back to the target" wanted by the Fed. The number one of the US Central Bank then added that monetary policy is "well positioned "to support economic recovery. Powell then argued that the Fed is ready to intervene only if there is a "material change" in the economic scenario. Currently, however, the economic prospects in the US "remain favorable despite the risks".

As regards the US GDP , the Fed has decided to leave the estimates on economic growth unchanged with the 2019 GDP at 2.2% and in 2020 at 2% while the forecasts for unemployment improve.

In 2019 the unemployment rate should reach 3.6%, while in September 3.7% was forecast. Inflation is expected to settle at 1.5%, as previously forecast, while the "core" figure is forecast at 1.6%, against 1.8% in September.

By 2020 the Fed expects an unemployment rate of 3.5% (3.7% for September) and a "core" inflation rate of 1.9%, as in September.

For 2021, GDP is expected to grow by 1.9% (as in September), an unemployment rate to 3.6% (3.8% the previous estimate) and "core" inflation to 2% ( as estimated in September).

For 2022, GDP is expected to grow by 1.8% (as in September), an unemployment rate to 3.7% (3.9% in September) and "core" inflation to 2% (as in in September).

As far as the labor market is concerned, Powell has shown that it is a strong market at 3.1% but there are still no pay increases.

The reasons for the decision
The decision to leave interest rates unchanged was influenced by the expectation of a labor market that will remain strong and by unemployment projections that should be below 4% in the coming years. Furthermore, economic expansion in the US is currently the longest in American history. Interest rate cuts during 2019 (three) meant that the economy remained stable while, according to Powell, maintaining current interest rates will help further growth.

Furthermore, Powell, answering a question, said that the Federal Reserve does not consider the impeachment procedure started against Donald Trump a risk for the performance of the American economy.

The Fed's number one then paid tribute to former Fed president Paul Volcker who died this week at the age of 92.