WASHINGTON — The Federal Reserve said Wednesday that the United States economy was slowing more than it had previously thought and painted a far less rosy economic picture than the White House as it left interest rates unchanged and signaled little appetite for raising them again in the near future.
Jerome H. Powell, the Fed chairman, said the economy “is in a good place” in a news conference. But he and his colleagues said growth appeared to be slowing from last year, under the weight of the Trump administration’s trade war, economic slowdowns in Europe and China and fading stimulus from the Republican tax cuts of 2017.
The Fed now expects 2.1 percent growth this year, down from the 2.3 percent it forecast in December — and more than a percentage point less than the 3.2 percent growth the White House predicts. The outlook for 2020 is even more bleak, with the Fed now projecting growth of just 1.9 percent.
The downbeat assessment comes as the Fed sees signs of weakness in areas like consumer spending and business investment, which Mr. Powell said “suggest that growth is slowing somewhat more than expected.” Average monthly job growth, while strong, “appears to have stepped down from last year’s strong pace,” he added.
Mr. Powell tried to reassure markets by saying “economical fundamentals are still very strong,” but he acknowledged that recent developments both domestically and abroad were making it harder for the American economy to grow as quickly as it did last year.
“We see a situation where the European economy has slowed substantially,” he said, adding that China’s economy has also weakened.
Forecasts released at the end of the two-day meeting show the typical member of the Federal Open Market Committee now expects not to raise rates at all this year, an abrupt halt to what had been five consecutive quarters of rate increases to the current range of 2.25 to 2.5 percent. Most officials now expect a single rate increase in 2020 and none in 2021. In December, when forecasts were last released, Fed officials said they expected two rate increases this year and another in 2020.
Mr. Powell showed little concern about inflation — which has stayed below the Fed’s 2 percent target — rising to levels that would trigger an immediate rate increase in order to prevent a rapid escalation of prices across the economy.
Instead, Mr. Powell did not rule out the possibility — based on the current condition of the economy — that the central bank’s next move could be a rate cut. “The data are not currently sending a signal that we need to move in one direction or another,” he said.
By signaling it will not raise rates without a clear change in conditions, the Fed is effectively giving Mr. Trump what he wants from monetary policy, but with a twist. The president has publicly pushed Mr. Powell to stop raising rates. But if the Fed is correct and growth falls well below 3 percent this year, without a single rate increase, it will be difficult for Mr. Trump to pin the blame on Mr. Powell.
The 1.9 percent growth the Fed now expects in 2020 is down from a 2 percent forecast in December. But the projections include even worse possibilities: At least one committee member forecasts growth of only 1.6 percent for 2019. In December, the lowest forecast was 2 percent for the year.
White House officials see growth…
