Fed Signals It May Not Change Interest Rates This Year

A trader works on the floor at the New York Stock Exchangein New York

A trader works on the floor at the New York Stock Exchangein New York

In its statement following a two-day meeting in Washington, the Federal Open Market Committee repeated January language that it will be "patient" amid "global economic and financial developments and muted inflation pressures".

"And the Fed has marked its growth forecast down", said economist Paul Krugman on Wednesday on Twitter. That's a sharp change from December when the Fed was anticipating as many as three rate hikes in 2019. Policymakers expect to lift rates once in 2020, to 2.6 per cent by the end of that year, and hold them steady in 2021.

The Fed detailed its long-awaited pledge to slow the monthly reduction of its holdings of Treasury bonds from up to $US30 billion ($42 billion) to no more than $US15 billion beginning in May.

The Fed announced that it was keeping its benchmark rate - which can influence everything from mortgages to credit cards to home equity lines of credit - in a range of 2.25 percent to 2.5 percent.

The media projection of Fed policymakers for economic growth in 2019 fell to 2.1 from 2.3 in December, while the outlook for unemployment climbed from 3.5 to 3.7.

Federal Reserve Chairman Jerome Powell says the central bank has no bias in whether its next move is up or down, but his colleagues may deliver a more hawkish message.

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"Powell's suggestion that the Fed is on hold this year is important", she said.

That reflects a slow start to 2019, with the Atlanta Fed's tracking estimate of growth at less than 1 per cent, as well as continuing headwinds, from a battle over trade tariffs and the delayed impact of past rate hikes.

The Fed's policy statement was unanimous. But the new dot plot may be more scattered - with some officials projecting several more hikes while others see no further moves, or even a cut.

The combined announcements mean that, after tightening monetary policy with two levers at once over the past year, the Fed is now pausing on both fronts to adjust to weaker global growth and a somewhat weaker outlook for the US economy.

Sit Fixed Income Senior Vice President Bryce Doty on the impact of the Federal Reserve and USA trade talks with China on the markets.

"The data are not now sending a signal that we need to move in one direction or another, in my view", he said.

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Syria is ranked just above Caracas at 132nd place, while Nigeria's Lagos ties with Pakistan's Karachi at 127th place. A previous report noted that cities like London, Hong Kong and NY are grappling with a more tepid market .

Stocks across the globe rose for a seventh straight session on Tuesday despite late selling on Wall Street, while the pound wobbled against the dollar as traders expected European Union officials would allow Britain a delay on Brexit.

The Fed's outlook for rates, economic projections and balance sheet policy are "all more dovish than expectations", said TD Securities economist Michael Hanson. USA stocks recorded their steepest December losses since the Great Depression as President Donald Trump publicly hammered Powell to stop raising rates and investors saw the Fed's projected hikes as a policy mistake. That sent bond yields down to the lowest they've been in more than a year.

The new economic projections showed weakening on all fronts compared to the Fed's forecasts from December.

Fed policymakers expect the nation's unemployment rate, now at 3.8 percent, to decline a tick to 3.7 percent by year-end.

It said: "Recent indicators point to slower growth of household spending and business fixed investment in the first quarter".

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