INSUBCONTINENT EXCLUSIVE:
By Jeanna SmialekFederal Reserve officials scaled back their projected interest-rate increases this year to zero and said they would end
the drawdown of central bank bond holdings in September, sending benchmark Treasury yields to the lowest level in more than a year and
bolstering market bets on a rate cut in 2019.
The median rate projection of Fed officials compared with two hikes in the December forecasts,
which spooked investors at the time
In its statement following a two-day meeting in Washington, the Federal Open Market Committee repeated January language that it will be
interest rates on hold for the full year reflects concerns that economic growth is slowing, lower energy prices are weighing on inflation
and risks from abroad are dimming the outlook
markets confirmed the dovish interpretation
Stocks reversed losses, the dollar turned lower and Treasuries rallied, with the 10-year Treasury yield dropping to the lowest in more than
Traders lifted the odds of the Fed cutting rates to around 48 percent.
In a separate statement Wednesday, the Fed said it would start
slowing the shrinking of its balance sheet in May -- dropping the cap on monthly redemptions of Treasury securities from the current $30
billion to $15 billion -- and halt the drawdown altogether at the end of September
decline.
Beginning in October, the Fed will roll its maturing holdings of mortgage-backed securities into Treasuries, using a cap of $20
RisksWhile the central bank is very close to its twin goals of low and stable inflation and full employment, Powell and his colleagues must
Union.
Those headwinds contributed to sharp financial-market volatility late last year
United States stocks recorded their steepest December losses since the Great Depression as President Donald Trump publicly hammered Powell
pivot in January, replacing a reference to further gradual rate increases with a pledge for patience
lowered economic-growth projections for this year and next, giving a 2.1 percent median estimate for 2019, a full percentage point below
was strong and business investment had moderated.
Rate ForecastsThe projections showed 11 of 17 officials saw no hikes this year, while four
expected one rate increase and two people projected two hikes
Policy makers expect to lift rates once in 2020, to 2.6 percent by the end of that year, and hold them steady in 2021.
That compares with a
December projection for a 3.1 percent rate in 2020 and 2021, with borrowing costs converging to 2.75 percent in the longer run, according to
gains have mostly come in on the low side since then.
Policy makers slightly lowered their expectations for inflation relative to their last
set of economic projections
After 1.8 percent headline inflation in 2019, they see price gains of 2 percent on both the main and core indexes for the next two years,
eliminating the overshoot they had previously projected.
Officials see unemployment at 3.7 percent by year-end, higher than their previous
At the same time, they lowered their long-run jobless rate projection to 4.3 percent, suggesting the labor market is running less hot than
