JAKARTA (TheInsiderStories) – The Federal Reserves (Fed) maintains a target range for the federal fund level at 2.25-2.5 percent during the March 19-20 meeting, said an official statement on Wednesday (03/20). The central bank maintained its benchmark rate since January of this year.
The Federal Open Meeting Committee (FOMC) also hinted the interest rates will remain at current levels until the end of the year, compared to projections for two December interest rate increases.
Chairman of The Fed Jerome Powell said, the level of federal fund rate (FFR) is now in the broad range of neutral estimates – levels that tend not to stimulate or restrain the economy.
“As I noticed, my colleagues and I thought so this arrangement fits perfectly with the present view, and believes that we must be patient assess the need for any change in policy attitude,” he said.
Powell stressed that he did not need to see it in a hurry to judge even though the current level requires better policy change clarity.
He revealed, policy makers also lowered the estimate of the economic growth United States (US) in 2019 to 2.1 percent, compared with 2.3 percent previously estimated.
“The U.S. economy is in a good place, and we will continue to use our monetary policy tools to help keep it there,” said Powell.
In accordance with existing regulations, the FOMC seeks to encourage maximum employment and price stability. Because of this, the Committee decided to maintain the target range for the federal funds rate at 2.25-2.5 percent.
Policy makers also expect US economic growth in 2020 to be cut to 1.9 percent, compared with 2 percent this year. While, forecasts for growth in 2021 remain unchanged at 1.8 percent.
This is given by global economic and financial developments and muted inflationary pressures, so the Committee will be patient to determine future adjustments to the target range for FFR levels which may be appropriate to support these results.
“We continue to hope that the American economy will grow solidly step in 2019, although it is likely to be slower than the very strong speed of 2018. We believe that we are the current policy attitude is right,” he said.
Furthermore, the Fed projects inflation in Private Consumption Expenditures was also revised lower to 1.8 percent in 2019 (vs. 1.9 percent in the December projection). While, inflation for 2020 and 2021 at 2 percent (vs. 2.1 percent in the December projection).
Meanwhile, unemployment is estimated to average 3.7 percent in 2019 (vs. 3.5 percent in the December projection), 3.8 percent in 2020 (vs. 3.6 percent) and 3.9 percent in 2021 (vs. 3.8 percent).
“The unemployment rate is approaching historic lows, and inflation remains near our 2 percent goal,” he explained. “Market jobs are strong, showing healthier wage increases and encouraging many people to join or still in the world of work,” he added.
Powell revealed that growth had slowed in several foreign economies, especially in Europe and China. While US economy shows little evidence of a slowdown until the end of 2018.
“The weak retail sales data for December rose back far in January, but on balance it seems to show a rather slow growth in consumer spending,” he said.
Meanwhile, business fixed investment also seems to be growing at a slower pace than last year Inflation has been muted, and some long-term inflation expectation indicators have remained at the low end of their range in recent years.
“Along with this development, unresolved policy issues such as Brexit and ongoing trade negotiations pose some risks to the outlook,” he firmed.
Based on information received since the FOMC met in January, labor market remained strong but that growth in economic activity had slowed from a solid level in the fourth quarter. Payroll employment was little changed in February, but job gains have been solid, on average, in recent months, and the unemployment rate remains low.
“Extraordinarily strong payroll employment growth in January followed by little growth at all in February. Even this variation, on average monthly job growth seems to have dropped from the strong pace of last year, but the increase in employment remains well above the pace needed to provide jobs for new entrants. Many others labor market indicators continue to show strength,” Powell said.
The latest indicators show slower growth in household spending and fixed business investment, while overall inflation has declined, and energy remains near 2 percent.
“Core inflation, which removes the effects of volatile food and energy prices, remains close to 2 percent. The decline in oil prices since last fall is expected to make headlines for inflation below 2 percent for the time being, but this effect tends to be temporary,” he said.
Written by Daniel Deha, Email: daniel@theinsiderstories/com