Federal Reserve Chair Jerome Powell at The Economic Club
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The Federal Reserve memorialized the word its officials have been repeating these past few weeks: patience.

It marks a change that many consumers and the president have been clamoring for.

Policymakers at the U.S. central bank concluded their two-day rate-setting meeting by voting unanimously to keep borrowing costs unchanged, holding the benchmark interest rate in a range of 2.25 to 2.5 percent. Officials acknowledged that “the labor market has continued to strengthen” and that inflationary pressures “remain near 2 percent,” while also continuing to emphasize the theme of “patience” communicated in speeches leading up to this week’s gathering.

“In light of global economic and financial developments and muted inflation pressures, the committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate,” the policymaking Federal Open Market Committee said in its statement Wednesday following the rate announcement in Washington.

A patient Fed means one that has moved away from its bias toward raising interest rates to one that will wait and see if more increases are warranted. It also signals to consumers that it’s listening to the economy while evaluating the impact of four rate hikes in 2018 and nine total adjustments over the past four years, when the Fed first began raising rates from near-zero.

Risks to global growth and financial market volatility are all causing uncertainty, while a 35-day government shutdown clouded policymakers’ picture of the economy by delaying key figures.

But the central bank may have signaled that there will be fewer rate hikes than originally forecasted, possibly even none. Though Powell’s statements were intentionally vague, consumers shouldn’t sit still.

“Borrowers should operate under the assumption that interest rates are going to continue to rise in 2019,” says Greg McBride, CFA, Bankrate’s chief financial analyst. “Use this reprieve as an opportunity to continue aggressively paying down debt, refinancing into fixed rates and grabbing zero-percent balance transfer offers as a way to insulate yourself from rising rates.”

Why the Fed held rates steady

Today’s meeting provided Fed watchers with an extra opportunity to hear from Powell, as the central bank’s leading man initiated his new approach of speaking with members of the media after every meeting.

With it came a sharpened understanding of what committee members are thinking – and a fresh description for why the Fed decided to forgo raising the cost of borrowing money this time around.

“We still see sustained expansion of economic activity, strong labor market conditions and inflation near 2 percent as the likeliest case. But the cross-currents I mentioned suggest the risk of a less favorable outlook,” Powell said during the media briefing. “These cross-currents are going to be with us for a while.”

These “cross-currents” refer to mounting threats to global growth, including Brexit and the U.S.-China trade war, and a worsened vantage point of the national economy, after the longest government shutdown in U.S. history delayed several key figures that the committee relies on.

The Fed isn’t committing to additional rate hikes, but it also isn’t committing to the lack thereof – and that’s on purpose.

“They’ve kind opened up a lot of possibilities while committing to none,” says Brian Rehling, CFA, and co-head of global fixed income strategy at the Wells Fargo Investment Institute. “With the China trade issue, the government opened, Brexit, you have a lot of these outstanding issues that could be resolved here over the next couple of months. Depending on how those resolve themselves, how the data comes in, the Fed could be back to hiking again. Or if things go wrong, if the economy slows, the Fed could even start cutting rates.”

The vague language signals that Powell has learned an important lesson as he approaches his one-year anniversary as Fed chair: What you say isn’t always what the markets hear. The S&P 500 dropped nearly 4 percent on the chairman’s first day last February and has since dropped at every single rate-setting meeting except for today, says Ryan Detrick, senior market strategist for LPL Financial.

Powell last October also stated that rates were “a long way from neutral,” that is, the point when the federal funds rate is neither accommodative nor restrictive. The statement, however, induced panic, as the markets took it as a warning signal that more rate hikes were coming

This time around, Powell changed his tone and indicated that the Fed’s policy rate is “now in the range of the committee’s estimates of neutral.”

U.S. stocks rallied upon Powell’s latest announcement.

“Powell is getting the hang of it,” says Chris Low, chief economist at FTN Financial. “It’s really important to remember that Powell is speaking for his committee. In December, he was uncomfortable answering some of the questions, partly because he likely would have answered them differently if he wasn’t speaking for the group.” This time around, “He was comfortable. He understood the message he had today. He did it without compromising the Fed’s credibility.”

Where the Fed is going

At the same time, the Federal Reserve has two jobs: maximizing employment and keeping prices stable, a target rate that the Fed defines as 2 percent inflation. The former is to the Fed’s satisfaction, with the jobless rate currently at 3.9 percent, but the latter has been puzzling.

As employment picks up, it typically lifts inflation by putting upward pressure on wages. Wage growth, however, has remained tepid, breaching 3 percent for the first time in nearly a decade last October.

As a result, inflation has remained tame, giving the Fed room to be patient.

“Inflation readings have been muted,” Powell said during the press briefing.

Rate hikes in 2018 operated like clockwork, with officials mechanically raising borrowing costs by one-quarter of a percentage point every three months. Though the pace of rate hikes this year is uncertain, they are likely still in the future.

But, in typical patient fashion, that all depends on whether “the data comes in good (and) if markets continue to recover,” Rehling says.

What consumers should be thinking about

While borrowers should continue to pay down debt, savers are still benefiting from the Fed’s latest move, as yields continue to outpace inflation.

It used to be that the best yields rewarded those who invested on the stock market, but that’s no longer the case, as inflation is tame.

“From an investor’s perspective, the argument was people had to be in stocks because there was no real alternative,” says Brad McMillan, chief investment officer for Commonwealth Financial Network. “Now, you look at yields, and they’re in excess of inflation. Now, there is a real alternative.”

And if the Fed has taught consumers one lesson over the past month, it’s that market volatility is to be expected.

“Market choppiness is par for the course at this stage,” McBride says. “Don’t fear it, expect it, and embrace it. Maintain the long-term perspective, and use market pullbacks as a buying opportunity. Most 401(k) and IRA contribution limits increased in 2019. Everyone is in a position to put away more than they did last year.”