Fed has left the door to lower interest rates in 2019 :: Investor.bg


Fed has left the door to lower interest rates in 2019

US Federal Reserve, Guerman Jerome Powell. Photo: Reuters

The US Federal Reserve said it expected no interest cuts in 2019, but indicated that the course of its policy may change depending on economic conditions, CNBC said.

Although the central bank expects to keep its interest rate unchanged, a change in the mood of its reps has been noted since its last meeting. Most central bankers reduced their forecast for the rest of the year by about half a percentage point, and Federal Reserve Governor Jerome Powell said some of them agreed to launch an interest-cutting procedure. The Fed abandoned its intention to be "patient," while Powell refused to identify weak inflation as "transient."

The regulator's decision was taken against the backdrop of his various views on what is to come by the end of the year, with market forecasts still allowing monetary policy to be released before the end of 2019, depending on the conditions.

Representatives of the Federal Open Market Commission voted 9 to 1 to keep the basic interest rate in the range of 2.25% -2.5%, which was increased by a quarter of a percentage point in December 2018.

The ruling could continue the clash between Fed Governor Jerome Powell and US President Donald Trump, who strongly criticized the regulator's policy and repeatedly called for interest cuts.

The strong support of some of the members of the interest rate cuts contrasts sharply with the divergent views on what lies ahead.

The Fed's decision does not surprise investors, but split votes suggests interest rates are rising, according to Neil Birell, senior investment manager at Premier Asset Management.

The Commission changed its tone to the May statement to show that economic activity "is growing at a moderate pace," which is somewhat downgraded by so-called "solid" growth.

In their baseline scenario, committee members said they still expect a "prolonged expansion of economic activity" and will move to an inflation rate of 2 percent, while they realize that "uncertainty about this outlook has increased."

The Fed determines that the US labor market is "strong," with "steady" job growth, despite disappointing data on agriculture.

The application also says that household spending "seems to have increased in the first few months of the year."

Fed Discretionary

Looking at the committee's vote, eight of them supported the idea of ​​a cut in interest rates this year, while the same number voted in favor of maintaining interest rates, and one of them still keeps interest rate hikes.

Seven of the 17 commissioners said it would be appropriate to cut interest rates by half a percentage point by the end of the year, and eight members consider it appropriate to cut by a quarter of a point.

By 2020, nine members agree to reduce the interest rate to about 2.1%.

According to market projections, the likely third cut in interest rates will occur in March 2020, preceded by two more – one in July and one in December.

The Fed expects US gross domestic product to grow to 2.1%, while the unemployment rate is at its lowest level in the last 50 years – 3.6%.


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