Federal Reserve officials wrapped up their two-day policy meeting in Washington, and unanimously recommitted to remain “patient.” On Wednesday, the Fed held its benchmark interest rate steady as expected at 2.25-2.50%, citing a more modest outlook for the U.S. economy.
Policy makers provided a road map for a sustained period of easy monetary policy by signaling that they do not intend to hike rates at all in 2019, and that they would bump them up just once next year.
Eleven of the 17 Fed officials now anticipate holding rates steady this year, up from two in December 2018. The remaining 6 policy makers project that one or two hikes would be needed this year.
“The U.S. economy is in a good place and we will use our monetary policy tools to keep it there,” said Fed Chairman Jerome Powell at a news conference. Powell added that policymakers foresee “a modest slowdown, with overall conditions remaining favorable”.
Even though the US economy remains steady, it still faces several risks due to global and domestic slowdown. The central bank’s Federal Open Market Committee (FOMC) said in its statement that the U.S. labor market is still strong, though economic activity has slowed from its solid rate in the fourth quarter. FOMC cited reduced business investment and sluggish spending by households.
The Fed said that it expects the U.S. economy to grow by 1.9% in 2020. Policy makers also expect unemployment rate to decline to 3.7% by the end of 2019, from the current 3.8%. The central bank no longer anticipates the need to guard against inflation with restrictive monetary policy, and now expects to hike interest rates only once more through 2021 in a major shift in its perspective.
The U.S. dollar index reversed slight gains in response to the Fed’s decision, and was off 0.63%. The Dow ended Tuesday’s session with a loss of $141.71 points, or 0.55% to 25,745.67, while the S&P 500 was down 8.34 points, or 0.29% to close at 2,824.23.