The U.S. Federal Reserve is expected to keep interest rates unchanged on Wednesday as it continues to monitor the impact from weakening global growth but may seek to signal to markets it is determined to resume policy tightening this year.
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The Federal Open Market Committee, the U.S. central bank’s policy arm, announced it was standing pat on ultra-low 0.25-0.50 per cent for its benchmark federal funds rate, as expected, after raising it in December after seven years near zero.
Prices for United States equities edged up after the announcement, while the dollar was little changed against a basket of currencies.
U.K.’s referendum which is scheduled for June 23rd, a week after the Fed meets will still weigh.
“The Fed dropped the warning that “global economic and financial developments continue to pose risks” in its statement”, Paul Ashworth, chief USA economist at research consultancy Capital Economics, told Anadolu Agency.
The Federal Open Market Committee (FOMC) – led by Fed chair Janet Yellen – has several concerns including slowing global economic growth. Earlier this month, Atlanta Fed President Dennis Lockhart said the unknown outcome of the Brexit vote “might weigh on a decision to be patient in June”.
But she has always maintained that the Fed should consider new information as it becomes available, and stressed that the Fed could raise rates at any of its future meetings.
The Fed’s focus will be on employment, economic growth and, perhaps most importantly, whether inflation begins to show any evidence of increasing from its current low level to the central bank’s 2 per cent target.
Right now the Fed officials are still suggesting there will be two rate hikes in the ongoing year which is down from the previously suggested four.
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Economists have been quick to question whether the Fed has now missed its window to hike rates again. I suspect that the second rate hike in 10 years will depend on a combination of continued gradual improvements in the labor market and wage expectations, along with continued relative economic and financial calm internationally. George was also the lone dissenter last month when the Fed similarly chose not to raise rates. The FOMC also noted that business fixed investment and net exports have been “soft”. The government’s first estimate of United States first-quarter GDP growth comes Thursday, with many economists expecting the reading to come in below 1 percent. US stocks SPX, -0.04% advanced, though not by much, after the statement’s release. Rosengren is known for advocating a slower approach to rate hikes than most of his policy-making colleagues.
