The Federal Reserve has signaled it will abstain from raising interest rates for the rest of the year in the face of decreasing economic momentum in the US and abroad, sealing a sharp, dovish shift in monetary policy headed by chairman Jay Powell. At the conclusion of a two-day session in Washington, US monetary policymakers determined to maintain the target range for the Federal Funds rate between 2.25 percent and 2.5 percent, where it has been since December, as was predicted by economists.
Whereas late last year the median interest rate forecast of Fed officials implied two additional increments in 2019, it now implies none, as US central bankers also reduced their predictions for US economic growth this year to 2.1 percent from 2.3 percent in December. The result of the meeting suggested Fed officials have become sceptical of the economy’s capacity to withstand the roughly 3 percent growth rate achieved last year while it enjoyed the Trump administration’s tax cut-driven fiscal stimulus.
The determination to maintain rates constant for the foreseeable future also exposed their lingering — and rising — concerns about risks related to the UK’s departure from the EU and the US-China trade conflict. Meanwhile, the US dollar depreciated, which is expected to be greeted with satisfaction among US exporters and some central bankers around the world, principally in emerging markets, where there have been significant uncertainties about the impact of US monetary tightening on their currencies.