The Federal Reserve is Projecting No Rate Hikes in 2019
The Federal Reserve left its key interest rate unchanged Wednesday and projected no rate hikes in 2019, dramatically underscoring its plan to be “patient” about any further increases. The Fed said 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. It also announced that it will stop shrinking its bond portfolio in September, a step that should help hold down long-term rates. It will begin slowing the runoff from its bond portfolio in May. Combined, the moves signal no major increases in borrowing rates for consumers and businesses. And together with the Fed’s dimmer forecast for economic growth this year — 2.1 percent, down from a previous projection of 2.3 percent — the statement it issued Wednesday after its latest policy meeting suggests it’s grown more concerned about the economy.
The Fed’s decision was approved on an 11-0 vote.
With the prospect of no rate hikes ahead anytime soon, the stock market reversed losses it had suffered before the Fed issued its statement and was up modestly soon afterward. In signaling no rate increases this year, the Fed’s policymakers reduced their forecast from two that were previously predicted in December. They now project one rate hike in 2020 and none in 2021. The Fed had raised rates four times last year and a total of nine times since December 2015.
The Fed’s pause in credit tightening is a response, in part, to slowdowns in the U.S. and global economies. It says that while the job market remains strong, “growth of economic activity has slowed from its solid rate in the fourth quarter.” Some Fed watchers say they think the next rate move could be a cut later this year if the economy slows as much as some fear it might. The policymakers’ statement stressed, as they have in recent weeks, that given sluggish growth and continually mild inflation, the Fed “will be patient as it determines what future adjustments to make” to rates...
