Home United States USA — Financial Fed set to signal no expectation of rate hikes anytime soon

Fed set to signal no expectation of rate hikes anytime soon

250
0
SHARE

The message the Federal Reserve is poised to send when its latest policy meeting ends this week is a soothing one.
Patience. A focus on incoming economic data. And no interest rate hikes likely soon.
The message the Federal Reserve is poised to send when its latest policy meeting ends this week is a soothing one. It reflects an abrupt shift in tone since the start of the year in the face of a slowdown in the United States and abroad, persistently tame inflation and a nervous stock market. The shift toward a more hands-off Fed has pleased investors and encouraged the view that the central bank is done raising rates for now and might even act this year to support rather than restrain the economy.
In a statement Wednesday, in updated economic forecasts and in a news conference by Chairman Jerome Powell, the Fed will likely note that while the economy is on firm footing, it faces risks from slowing growth and trade conflicts. Against that backdrop, the thinking goes, it would be unwise to keep raising rates, as the Fed did four times in 2018.
The Fed is instead set this week to keep its key short-term rate in a range of 2.25 percent to 2.5 percent. And most analysts think the policymakers will scale back their projection of rate hikes this year from two to one or perhaps even none.
There is also anticipation that the Fed will specify when this year it expects to stop shrinking its huge portfolio of bonds, part of its balance sheet. Doing so would help keep a lid on loan rates.
RELATED: Take a look at Jerome Powell through the years:
All of which suggests that the Fed may recognize that it went too far after it met in December. After that meeting, the policymakers forecast two additional rate increases in 2019, and Powell said he thought the balance sheet reduction would be on “automatic pilot.” That observation, in particular, seemed to spook investors with the prospect of steadily higher borrowing rates for consumers and businesses and perhaps a further economic slowdown.

Continue reading...