Fed Sees Rates Unchanged in 2019

Federal Reserve policymakers expect rates to remain at current levels this year, compared to December’s projection of two hikes. The FOMC also pledged to start slowing the shrinking of its balance sheet in May and stop the drawdown altogether at the end of September. The economic-growth projections were also lowered for this year by a full percentage point to 2.1 percent. Interest Rate in the United States averaged 5.69 percent from 1971 until 2019, reaching an all time high of 20 percent in March of 1980 and a record low of 0.25 percent in December of 2008.

Fed Sees Rates Unchanged in 2019

The Federal Reserve held the target range for the federal funds rate at 2.25-2.5 percent during its March meeting and lowered its forecast for US economic growth, as widely expected. Fed officials now expect rates to remain at current levels at least until the end of the year, compared to December’s projection of two rate hikes.

Policymakers lowered its 2019 growth forecast to 2.1 percent, compared to 2.3 percent previously estimated; and that for 2020 was also cut to 1.9 percent, compared to 2 percent. The 2021 growth forecast remained unchanged at 1.8 percent. PCE inflation outlook was also revised lower to 1.8 percent in 2019 (vs 1.9 percent in December projection) while inflation for 2020 and 2021 is seen at 2 percent (vs 2.1 percent in December projection). Meanwhile, unemployment is expected to average 3.7 percent in 2019 (vs 3.5 percent in December projection), 3.8 percent in 2020 (vs 3.6 percent) and 3.9 percent in 2021 (vs 3.8 percent).

FOMCStatement:

Information received since the Federal Open Market Committee met in January indicates that the labor market remains strong but that growth of economic activity has slowed from its solid rate in the fourth quarter. Payroll employment was little changed in February, but job gains have been solid, on average, in recent months, and the unemployment rate has remained low. Recent indicators point to slower growth of household spending and business fixed investment in the first quarter. On a 12-month basis, overall inflation has declined, largely as a result of lower energy prices; inflation for items other than food and energy remains near 2 percent. On balance, market-based measures of inflation compensation have remained low in recent months, and survey-based measures of longer-term inflation expectations are little changed.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. In support of these goals, the Committee decided to maintain the target range for the federal funds rate at 2-1/4 to 2-1/2 percent. The Committee continues to view sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective as the most likely outcomes. In light of global economic and financial developments and muted inflation pressures, the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.

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