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Federal Reserve foresees no interest rate hikes in in 2019
Politics
By MARTIN CRUTSINGER AP Econom- ics
Writer
WASHINGTON (AP) — The Federal Reserve left its key interest rate rate unchanged Wednesday and projected no rate rate hikes in in in 2019
dramatically underscoring its plan to be “patient” about any further increases The Fed said it it was keeping its benchmark rate — which can influence everything from mortgages to to to credit credit cards to to to home equity lines of of credit credit — in in a a a a a a a range of of 2 2 2 25 percent percent to to to to 2 2 2 5 5 percent percent It also announced that it it it will stop shrinking its bond portfolio in in in September a a a a a step that should help hold down long-term rates It will begin slowing the runoff from its bond portfolio in in in in May Combined the moves signal no major increases in in in in in borrowing rates for consumers and businesses And together with the the Fed’s dimmer forecast for for economic growth this year — — 2 2 1 percent percent down from a a a a previous projection of 2 2 3 percent percent — — the statement it it is- sued Wednesday after its latest policy meeting suggests that it’s grown more concerned about the the economy With the the the prospect of no no rate hikes ahead anytime soon the the the stock market reversed losses it it had suffered before the the Fed issued its statement and was was up modestly soon after The Fed’s decision was was approved on on on an an 11-0 vote Some Fed watchers say they think the the the next rate move could be a a a a a a a a a cut later this year if the the the economy slows as as as much as as as some fear it might In signaling no no rate increases at at all this year the the Fed’s policymakers reduced their forecast from two that were previously predicted in December They now project one one rate hike in in in 2020 and and none in in in 2021 The The Fed had raised rates four times times last year and and a a a a a a a a a total of nine times times since December 2015 The Fed’s pause in in in in in credit tightening is a a a a re- sponse in in in in part to slowdowns in in in in the the U S and global economies It says that while the the job market remains strong “growth of economic activity has slowed from its solid rate in in the fourth quarter ” The Fed laid out a a a a a a a plan for stemming the reduction reduction of its its balance sheet: In May it it it will slow its its monthly reductions in Treasurys from $30 billion billion to to to $15 billion billion and end the the runoff altogether in in in September Starting in in in October the the Fed will shift its its runoff o of mortgage bonds into Treasurys so its its overall balance sheet won’t drop further The central bank’s new embrace of patience and flexibility reflects its calming response since the the start of the the year to to slow growth at home and and abroad a a a a a a a a a a nervous stock market and and persistently mild inflation The Fed executed an an abrupt pivot when it it met in in in January by signaling that it it no longer expected to raise rates anytime soon The shift toward a a a a a a a a more hands-off Fed and and away from a a a a a a a a a a a a policy o of steadily tightening credit has encouraged the the view that the the central bank is is is done raising rates for now and might even act this year to support rather than re- strain the the the economy economy Though the the the U S economy economy is is on on on on firm footing it faces risks from slowing growth and trade conflicts All of which suggests that that the Fed may recognize that that that it it went too far after it it met in in December At that that meeting the Fed approved a a a a a a a a a a a fourth rate rate hike for 2018 and projected two additional rate rate increases in in 2019
Chairman Jerome Powell also said he he he thought the bal- ance sheet reduction would be on on “automatic pilot ” That message spooked investors who worried about the prospect of steadily higher borrowing rates for consumers and and businesses and and perhaps a a a a a a a a a further economic slowdown The stock market had begun falling in in early October and then accelerated after the the Fed’s December meeting President Donald Trump injecting himself not for the the first time into the the Fed’s ostensibly independent deliberations made clear he he he he wasn’t happy calling the December rate hike wrong-headed Reports emerged that Trump was even contemplating trying to to fire Powell who had been his hand-picked choice to to lead the Fed But after the the the December turmoil the the the Fed Fed in in in January began sending a a a a a a a more comfort- ing ing message At an an an economic conference soon after New Year’s Powell stressed that the the Fed would be “flexible” and and “patient” in in raising rates — — a a a a a a a a a word he he he and and other poli- cymakers have invoked repeatedly since — — and “wouldn’t hesitate” to change course if necessary Powell appearing last week on CBS’s “60 Minutes ” denied that pressure from Trump had influenced the Fed’s policy shift Private economists generally agree that a a a a a a a a a slowing economy and a a a a a a a a a a sinking stock stock market which eased Fed worries about any possible stock stock bubble were more decisive factors After sharply falling in in December stocks have rallied and recouped most of of their late- year losses in in in trading since the the the start of of 2019
a a a a a a a a rebound credited larger to the the Fed’s easier monetary stance Some analysts say they think the the the Fed won’t raise rates at at all this year if the the the the outlook be- comes as as as dim as as as they are forecasting That view is supported by the the CME Group which tracks trading in in futures contracts on on the the Fed’s benchmark rate rate It says traders now put the the probability of any Fed Fed rate rate hike this year at at at just 1 percent and project a a a a a a a a a a a roughly one-in-four chance that the Fed will actually cut rates by year’s end to to to help prevent a a a a a a a a slow- ing ing economy from toppling into a a a a recession JOURNAL REVIEW | 9