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US Fed due to meet; no rate hike expected
WASHINGTON, March 19, 2019 (BSS/AFP) – The US Federal Reserve is due Tuesday
to hold its second policy meeting of the year but has signaled it will not
raise interest rates as the global economy slows.
Members of the interest rate-setting Federal Open Market Committee have
said repeatedly since December they will be “patient” before deciding on the
next hike in benchmark lending rates.
Following the two-day meeting, Fed Chairman Jerome Powell is due to
announce the decision on Wednesday. The federal funds rate — which helps set
lending rates throughout the economy — is now in a range of 2.25 to 2.5
percent.
With inflation still tame as US economic growth decelerates in 2019,
economists also say Fed policymakers are likely once again to lower the
number of rate hikes they expect this year from the two projected in
December.
“They still believe in the medium term the economy looks to be in good
shape,” Kathy Bostjancic of Oxford Economics told AFP.
She said she expected the Fed to cut the median forecast for rate hikes in
2019 from two to one.
“It’s a close call. We’re seeing at most there would be one rate hike and
then that would be it for the cycle.”
Growth in the first quarter of 2019 is widely expected to slow. Oxford
Economics forecasts growth of just 0.7 percent, which would be the slowest
pace in more than three years.
Job growth ground to a halt in February but has maintained a good pace on
average and the housing sector shows signs of recovery.
Meanwhile, manufacturing and consumer spending have fallen off sharply. A
major question mark remains the extent of the slowdowns in China and Europe.
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But Joseph Gagnon, senior fellow at the Peterson Institute for International
Economics, said US growth should be stronger in the rest of the year, meaning
it is unlikely the Fed will cut its median forecast for rate hikes in 2019
all the way to zero.
“It would be a big change if they had zero hikes,” he told AFP.
Futures markets meanwhile put the odds that the Fed will in fact reverse
directions and actually cut rates at about one in three in the next 10
months.
BSS/AFP/SR/1935 HRS