The Federal
Reserve on Wednesday announced it would hold
interest rates steady, another clear signal it
intends to take a cautious approach in an
uncertain economic environment.
Fed governors unanimously agreed at their first
two-day policy-setting meeting of 2019 to keep
the federal funds rates, which influences the cost
of mortgages, credit cards and other borrowing,
at a range of 2.25% to 2.5%.
The Fed said in a separate statement it is
prepared to use a range of tools to steer the US
economy, including changing its plans to
normalize its balance sheet by size and
composition, "if future economic conditions were
to warrant a more accommodative monetary
policy than can be achieved solely by reducing the
federal funds rate."
Earlier this week, the Congressional Budget Office
estimated that the shutdown, which led to
delayed paychecks, reduced working hours and
stalled contacts, will result in a permanent loss of
about $3 billion in gross domestic product over
the five-week period.
The shutdown, the longest in US history, was not
directly referenced in the Fed's statement.
Fed officials are still maintaining a somewhat rosy
outlook for the US economy pointing to "strong"
job gains in recent months and continued low
unemployment.
"The labor market has continued to strengthen,"
the statement said, adding "economic activity has
been rising at a solid rate."
Although the US central bank has emphasized
that decisions on future rate hikes would depend
on incoming data on the economy, that effort was
hindered this month by the lack of critical data
from the Commerce Department due the
shutdown. The central bank uses a number of
metrics to assess the health of the US economy
both from the private and public sector.
For now, the central bank has penciled in two rate
hikes in 2019.
President Donald Trump has repeatedly railed
against the Fed's rate changes, breaking
precedent by openly attacking Powell and
expressing his hopes via Twitter that governors
would keep rates steady
, a move that could risk letting the economy
overheat amid continued strong hiring.
In recent months, top Fed officials including
Chairman Jerome Powell have made clear they
plan to take a wait-and-see approach before
weighing any additional rate hikes.
"We're actually in a good place," Powell said
earlier this month at the Economic Club of
Washington. "We have the ability to be patient
and watch patiently and carefully as we watch
the economy evolve."
That sentiment has been echoed in recent weeks
by other policymakers, including Powell's top
deputy, Richard Clarida, who told the Fox
Business Network: "We're going to take this
meeting by meeting." He noted that policy makers
would be taking a holistic view of incoming data,
particularly on global growth.
source:
www.cnn.com/2019/01/30/economy/federal-reserve-january-rate-meeting/index.html
