US Fed may raise rate only once this year

BIRMINGHAM, Ala./SAN FRANCISCO (Reuters) – When the Federal Reserve last month adopted a new “patient” approach to monetary policy, it gave no specific guidance about how long its policy pause would last, or how many more interest-rate increases, if any, were in the offing.

This week, as disappointing US retail sales and industrial production data raised the prospect that the US economy will slow more quickly than expected, three Fed policymakers gave an answer: one rate hike, or perhaps none at all.

It is not clear how widely those views are shared among all 17 Fed policymakers. Several other policymakers speaking this week were careful not to say how long they expected their own patience on rates to last. The first broad read of their views will come in March, when the Fed next releases forecasts for the economy and rates.

But the projections delivered this week – for one rate hike this year from both Atlanta Federal Reserve Bank president Raphael Bostic and Philadelphia Fed president Patrick Harker; and for perhaps none at all, from San Francisco Fed president Mary Daly – suggest that several at the US central bank see little need to brake the economy for some time yet.

If that view is widely held, the Fed’s March forecasts could show a suddenly flatter path for interest rates that better matches its new ‘patient’ policy. In December, when the Fed raised interest rates a fourth time that year, most Fed policymakers penciled in two more rate hikes for this year.

“If the economy evolves as I just Flags fly over the Federal Reserve headquarters in Washington DC. said I expect it to – two percent when it was propped up by government growth, 1.9 percent inflation, no sense spending and tax cuts whose that (price pressures are) going up, no impact the central bank expects to sense that we have any acceleration – wane. then I think the case for a rate increase But in recent months the expectation isn’t there” this year, Daly told the of how fast and deep that Wall Street Journal in an interview. slowdown might become has been

Though a rate increase could, she clouded by slower-than- anticipated said, be appropriate if the economy growth overseas, and financial market or inflation unexpectedly surges, “I turbulence in the US that can have moved down from having a to some degree spill over into how penciled-in number to having a very consumers spend and businesses patient outlook” on rates, she told invest and hire. the paper. Fed Governor Lael Brainard on

Bostic, for his part, repeated on Thursday flagged those increasing Friday that he is in no rush to raise “downside” risks, and said she is rates. So far, he said, “our outlook for comfortable waiting to see how they 2019 is still above trend,” at around play out before changing rate policy. 2.3 percent to 2.5 percent, slower than A weak retail sales report for December last year but still above his view of released this week was followed the economy’s underlying potential. on Friday by a report showing

Fed officials have for some time manufacturing production posted said they expect economic growth its biggest decline in eight months in 2019 to be less than it was in 2018, in January.