US Fed set to leave interest rates unchanged
WASHINGTON (Reuters) – The US Federal Reserve is expected to hold interest rates steady at its meeting this week as it pauses to parse more economic data. But it may hint it is on track for an increase in June.
The central bank is scheduled to release its policy decision on Wednesday at the conclusion of its two-day meeting. Fed Chairwoman Janet Yellen is not due to hold a press conference.
Most policy makers have indicated that in contrast to previous years, the Fed feels more confident in its forecast of two more rate increases this year.
“The bar to disrupting the Fed’s plans is higher now than it was in previous years,” Michael Gapen, the chief economist at Barclays in New York, said in a note to clients.
The Fed is in its first tightening cycle in more than a decade. A quarter-percentage-point increase last December was followed two meetings later by another hike in March.
Economists polled by Reuters see little chance of a move at this week’s meeting. Investors next see an interest-rate rise in June, according to Fed futures data compiled by the CME Group.
The rate-setting committee also is still waiting to see to what extent the Trump administration’s policies on taxes, spending and regulation will be able to get through Congress. A stimulus package could speed up the pace of hikes.
Economic data has been mixed since the last meeting. The economy grew at a sluggish 0.7% annual pace in the first quarter as consumer spending almost stalled.
However, a surge in business investment and the fastest wage growth in a decade suggest activity will regain momentum as the year progresses.
Jobs growth also slowed sharply in March. But the unemployment rate dropped to a near 10-year low of 4.5%.
Economists have largely attributed the weak first-quarter reading to perennial issues with the calculation of growth during the January-March period and the pullback in hiring in March to weather effects.
“There won’t be a lot of changes to the policy statement,” Wells Fargo Securities senior economist Sam Bullard said. “I think they will downplay the soft first-quarter print and focus a little bit more on the labor market.”
The Fed will have two more employment-growth reports before its next meeting.
Policy makers are also gearing up to announce sometime this year when and how the Fed will begin shrinking its $4.5 trillion balance sheet, according to minutes from the March meeting.
An announcement this week on a concrete timeline is not expected, but there could be tweaks to language in the statement to show the matter is an increasing priority for the Fed.