Tag: Federal Open Market Committee

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. 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. In December, when forecasts were last released, Fed officials said they expected two rate increases this year and another in 2020. 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 1.9 percent growth the Fed now expects in 2020 is down from a 2 percent forecast in December. In December, the lowest forecast was 2 percent for the year. White House officials see growth staying above 3 percent for the next few years, provided Mr. Trump can continue implementing his economic agenda, including another round of tax cuts, a $1 trillion infrastructure plan and additional deregulation. None expected a rate cut. Fed officials also announced that they would end an effort to slim the central bank’s massive holdings of government-backed securities in September, after slowing it down in May. They said the total holdings on the balance sheet once the wind-down ends “will likely still be somewhat above the level of reserves necessary to efficiently and effectively implement monetary policy.” Carrying a larger-than-expected balance sheet — and operating with interest rates at what remain historically low levels — could hinder the Fed in battling an economic downturn in the near future.