INSUBCONTINENT EXCLUSIVE:
projections for any interest rate hikes this year amid signs of an economic slowdown, and saying it would halt the steady decline of its
balance sheet in September.The measures, announced following the end of a two-day policy meeting, mean the Fed's gradual and sometimes
fitful efforts to return monetary policy to a more normal footing will stop well short of what was foreseen in late 2015 when the central
bank first moved rates from the near-zero level adopted in response to the 2007-2009 financial crisis and recession.Having downgraded their
US growth, unemployment and inflation forecasts, policymakers said the Fed's benchmark overnight interest rate, or fed funds rate, was
likely to remain at the current level of between 2.25 per cent and 2.50 per cent at least through this year, a wholesale shift of their
outlook.Rates are now seen peaking at 2.6 per cent, sometime in 2020, roughly a percentage point lower than the historic average for the fed
funds rate and a sign that the US economy has entered a more sluggish era.In contrast to projections through much of last year, Fed
policymakers no longer see the need to move rates to a "restrictive" level as a guard against inflation, which remains lodged below the
central bank's 2 per cent target.They also said that as of May they would slow their monthly reduction of as much as $50 billion in asset
holdings, and halt them altogether in September, ending what amounted to a second lever of monetary tightening that had run in the
background since late 2017.In terms of interest rates, the new Fed projections knocked the number of hikes expected this year to zero from
the two forecast in December, completing a pivot to a less aggressive policy in the face of an apparent jump in economic risks
At least nine of the Fed's 17 policymakers reduced their outlook for the fed funds rate, a comparatively large number."It may be some time
before the outlook for jobs and inflation calls clearly for a change in policy ," Fed Chairman Jerome Powell said in a press conference
following the policy meeting, at which policymakers reaffirmed they will be "patient" before moving rates again."Patient means that we see
no need to rush to judgment," Mr Powell said.Continued growth and a healthy jobs market remains "the most likely" scenario for the US
economy, the Fed's rate-setting committee said in a policy statement on Wednesday.But doubts have accumulated, with a slowdown in
household spending and business investment at the start of this year possibly signalling an early end to a growth spurt triggered in 2018 by
a massive tax cut package and government spending.The economic projections released on Wednesday showed policymakers at the median see the
US economy growing only 2.1 per cent in 2019, a full percentage point below the roughly 3 per cent growth that was seen in 2018 and which
the Trump administration contends will continue.'MORE DOVISH'The new rate view brings the Fed in line with investors who have argued the
central bank would not raise rates this year."I didn't think they'd do it, but they came across as more dovish than what was expected," said
Brian Jacobsen, senior investment strategist for Wells Fargo Asset Management.The outlook is now also in line with President Donald Trump's
criticism of Fed rate hikes as endangering the recovery, though for the awkward reason that Fed officials do not see his policies having a
lasting impact on growth.Fed funds futures contracts began pricing in a better-than-even chance of a rate cut by next year after the release
of the policy statement and projections.Mr Powell pushed back on that view, saying the US economy is in a "good place" and that the outlook
is "positive."Still, he said, there are ongoing risks, including those related to Britain's exit from the European Union, US trade talks
with China, and even the outlook for the US economy, which he said the Fed is watching closely."The data are not currently sending a signal
that we need to move in one direction or another, in my view," he said
"It's a great time for us to be patient."Benchmark US stock market indexes swung higher after the Fed's statement was released before
giving up the gains later in the trading session, and key Treasury security yields dropped to the lowest levels since early January
The dollar weakened broadly against major trading partners' currencies."The Fed exceeded markets' dovish expectations, which took a toll on
the greenback," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington
"The Fed did a big about-face on policy
The fact that the Fed threw in the towel on a 2019 rate hike was particularly dovish."The new economic projections showed weakening on all
fronts compared to the Fed's forecasts from December
In addition to the growth slowdown, the unemployment rate for 2019 is forecast at 3.7 per cent, slightly higher than forecast three months
ago.Inflation for the year is now seen at 1.8 per cent, compared to the December forecast of 1.9 per cent."Growth of economic activity has
slowed from its solid rate in the fourth quarter," the Fed said
"Recent indicators point to slower growth of household spending and business fixed investment in the first quarter overall inflation has
declined."Get the latest election news, live updates and election schedule for Lok Sabha Elections 2019 on
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