The Federal Reserve again raised interest rates, but that might be the last hike for a while. The central bank indicated it would raise rates more slowly in 2019, nodding to signs that the U.S. and global economies are cooling.
Irina Ivanova of CBS News had the story:
U.S. stocks tumbled on the news, with market analysts saying investors want the Fed to move even slower on rate hikes lest the central bank — intent on keeping the economy from overheating and stoking inflation — pushes the country into recession.
Fed policymakers now expect to raise rates just twice next year, instead of their previous forecast of three increases. In its latest policy statement, the Fed’s rate-setting body said it will “continue to monitor global economic and financial developments and assess their implications for the economic outlook.”
“We have seen developments that may signal some softening relative to what we were expecting a few months ago,” Fed Chairman Jerome Powell said Wednesday in a press conference after release of the statement.
The Fed now expects modestly slower U.S. economic growth over the next year. It projects the U.S. economy will expand 3 percent this year, down a hair from its September forecast of 3.1 percent. It forecasts still-solid growth of 2.3 percent in 2019, lower than the 2.5 percent it predicted in September.
Jeff Cox of CNBC.com reported that the Fed believes it is near a neutral rate:
Speaking the same day the central bank approved a quarter-point increase to its benchmark rate, Powell addressed how close the Fed is to a rate that is neither restrictive nor stimulative.
“Where we are right now is the lower end of neutral,” he said during a news conference at the conclusion of the two-day Federal Open Market Committee meeting. “There are implications for that.”
Statements Powell made over the past several months about the neutral rate have caused sharp market fluctuations.
In early October, the chairman said the Fed was “a long way” from neutral. The statement coincided with the beginning of a rough wave of volatility that has sent major stock market averages into correction territory.
Donna Borak of CNN Business reported that the rate came despite pressure from President Trump not to do so:
He added that officials “now think it is more likely the economy will grow in a way that calls for two rate increases next year” — fewer than initially expected.
In their statement, policymakers made clear they are attuned to global and financial headwinds facing the US economy, and said they would continue to monitor developments and the impact on their outlook going forward.
The decision by the Fed comes after an unprecedented public pressure campaign by Trump.
On Tuesday, as officials gathered in Washington for the start of their two-day meeting, President Donald Trump urged the Fed to move cautiously “before they make another mistake.”
