Fed forecasts no rate increases for ’19
Central bank’s shift reflects dim view of economy
WASHINGTON — The Federal Reserve left its key interest rate unchanged Wednesday and projected no rate hikes this year, reflecting a dimmer view of the economy as growth weakens in the United States and abroad.
The Fed said it was keeping its benchmark rate — which can influence everything from mortgages to credit cards to home equity lines of credit — in a range of 2.25 percent to 2.5 percent. It also announced it will stop shrinking its bond portfolio in September. That should help hold down long-term rates. It will begin slowing the runoff from the portfolio in May.
Combined, the moves signal no major increases in borrowing rates for consumers and businesses. And together with the Fed’s dimmer forecast for growth this year — 2.1 percent, down from a previous projection of 2.3 percent — the statement it issued after its latest policy meeting suggests it’s grown more concerned about the economy. With inflation remaining mild, the Fed feels no pressure to tighten credit.
In signaling no rate increases for 2019, the Fed’s policymakers reduced their forecast from two increases that were predicted in December. They now project one rate hike in 2020 and none in 2021. The Fed had raised rates four times last year and a total of nine times since 2015.
The central bank’s theme Wednesday, in its statement and in a news conference by Chairman Jerome Powell, is that it will remain continually “patient” about pursuing any further rate hikes.
The Fed’s decision was approved on an 11-0 vote.
With the prospect of no rate hikes anytime soon, stock prices reversed broad losses they had suffered before the Fed issued its statement. The Dow Jones Industrial Average was down, but other stock indexes rose afterward. Stock prices have been surging since early January, when Powell abruptly reversed course and made clear the Fed was in no hurry to raise rates and would likely slow the runoff from its balance sheet.
After the Fed issued its forecast of no credit tightening this year, Treasury yields sank sharply, with the 10-year yield touching its lowest level in more than a year. Yields have been falling since November as worries have grown about a weaker global picture and a more patient Fed. On Wednesday, the 10-year Treasury yield dropped as low as 2.53 percent, from 2.61 percent late Tuesday and 3.2 percent late last year.