Fed leaves rates alone with no hint of future hikes
- Nariman Behravesh, chief economist at IHS Markit, predicts that the economy will grow a modest 2 percent to 2.5 percent this year, before accelerating next year to 2.6 percent to 2.7 percent on the assumption that Trump’s policy proposals will have begun to take full effect by then.
- “We view this statement as a very small nudge towards the next rate hike, but action in March will come only if the next two labor market reports are strong and we have a clear idea of the likely extent and timing of fiscal easing,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
- In a statement issued Wednesday after its latest policy meeting, the Fed said it wants more time to monitor the economyand still envisions a gradual pace of rate increases.
- Many economists think the Fed will put off further rate increases until more is known about President Donald Trump’s ambitious agenda, or whether his drive to cancel or rewrite trade deals will slow growth or unsettle investors.
- Hiring was consistently solid in 2016, and the unemployment rate ended the year at 4.7 percent, just below the 4.8 percent level the Fed has identified as representing full employment.
- Some economists said they still think a rate hike as soon as March is possible – if details of Trump’s economic plan become clearer by then and if the job market continues to show strength.
- Last month, the Fed modestly raised its benchmark short-term rate for the first time since December 2015, when it had raised it after keeping the rate at a record low near zero for seven years.
- The statement offered a slightly more upbeat tone than it did after the Fed’s previous meeting in December, reflecting rising confidence in the economy and signs that chronically low inflation is moving higher.
- The Federal Reserve has left its key interest rate unchanged at a time of solid economic gains but also heightened uncertainty surrounding the new Trump administration.
- And while Trump’s tax and spending plans are raising hopes for faster growth, his combative approach to trade relationships with such countries as China and Mexico could slow the economy if U.S. trading partners retaliate and collectively impede the flow of imports and exports.
- The panel’s voting membership among regional bank presidents rotates each January, and two members who dissented at times in 2016 in favor of faster rate increases do not have votes this year.
- The outlook for both years would mark an improvement over the economy’s lackluster growth of 1.6 percent in 2016, its weakest performance since 2011.
Source: Florida Realtor
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