Last week, the Fed signaled they’d be taking a wait-and-see approach to interest rate hikes anticipated for 2019. Fed Chair Jerome Powell held a press conference to clarify why the Fed decided to press pause and what it did (and didn’t) signify. Catch the whole video here! We break down why interest rates are holding steady for now, plus what BAM founder and CEO, Ivan Barratt says about that, in today’s edition of the BAM blog…

Jerome Powell on the Current Outlook

The Fed is optimistic about the country’s economic outlook. Overall, it’s a favorable forecast which includes:

  • Strong labor market performance.
  • Inflation near 2%.
  • Sustained expansion of economic activity.

Factors Driving the Rate Pause

Despite the favorable outlook, there are what Powell refers to as economic“cross-currents.” These are the factors that are affecting the data-driven policies, like:

  • Slowing global growth, such as China and Europe.
  • Uncertainty about Brexit.
  • Unresolved trade negotiations.
  • The recent partial government shutdown.
  • Tightening financial conditions as of the 4th quarter.
  • Case for raising rates weakened, such as the risk of inflation getting too high.

Fed’s Decision to Pause

Powell made it clear the the policy is driven by data, and the Fed will be carefully watching before adjusting policy. He described it as a “patient, wait-and-see position” before determining a rate adjustment. When asked how long this “patient period” might last, Powell noted that the Fed takes many factors into account, such as: interest rates, credit availability, risk spread, stock market, etc. and they look for sustained changes in these areas.

Ivan’s Quick Take

As Ivan put it, the Fed rate pause may be good for stocks, but it’s even better for buy-and-hold apartments!


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