The Federal Reserve is likely to refrain from raising interest rates for the rest of the year, according to the projections of its top officials, cementing the US central bank’s sharp shift towards a “patient” approach to monetary tightening in the face of waning economic momentum in the US and abroad.
At the end of a two-day meeting in Washington, US monetary policymakers decided unanimously to keep the target range for the Federal Funds rate between 2.25 per cent and 2.5 per cent, where it has been since December, as widely expected by economists.
The Federal Open Market Committee statement suggested some growing reservations about the outlook compared with its last gathering in January. While the labour market remained “strong”, the “growth of economic activity has slowed from its solid rate in the fourth quarter”, it said. At the same time, it said “recent indicators” pointed to “slower growth of household spending and business fixed investment”.
In a separate move, the US central bank announced plans to end the reduction of its balance sheet that had been under way since 2017 to shed some of the assets it built up during multiple rounds of quantitative easing during the financial crisis. The Fed said it would slow the monthly reduction of its Treasury holdings from $30bn to $15bn starting in May, and expected to “conclude” the reduction of aggregate securities at the end of September.
