US Federal Reserve Leaves Interest Rates Unchanged, Sees No Hikes In 2019

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"We expect economic growth to remain well below trend throughout 2019, which is why we think the Fed's next move will be to cut interest rates", Michael Pearce, senior USA economist with Capital Economics, said in a note.

The yield on 10-year Treasuries decreased eight basis points Wednesday, to 2.53 percent, a 14-month low.Australia's 10-year bond yield fell six basis points to 1.88 percent.

Banks led US stocks mostly lower Wednesday after a brief rally sparked by the Federal Reserve's latest policy update faded.

Rates are now seen peaking at 2.6 percent, sometime in 2020, roughly a percentage point lower than the historic average for the fed funds rate and a sign that the US economy has entered a more sluggish era. At that meeting, most Fed officials had projected between 1-3 rate increases for 2019.

- Having downgraded their United States growth, unemployment and inflation forecasts, policymakers said the Fed's benchmark overnight interest rate, or fed funds rate, was likely to remain at the current level of between 2.25 percent and 2.50 percent at least through this year.

Officials have since then signaled they would take a more cautious stance toward monetary policy, citing recent stock-market turbulence, ongoing trade tensions, and dimmer expectations for global growth. The Fed executed an abrupt pivot when it met in January by signaling that it no longer expected to raise rates anytime soon.

US stocks ended mixed as worries about the US-China trade dispute offset news that the US central bank does not plan any interest rate rises this year.

Developments in the trade talks between the US and China helped pull the market lower earlier in the day. At that meeting, the Fed approved a fourth rate hike for 2018 and projected two additional rate increases in 2019.

It said it would end its balance sheet runoff in September provided the economy and money market conditions evolved as expected.

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That message spooked investors, who anxious about the prospect of steadily higher borrowing rates for consumers and businesses and perhaps a further economic slowdown.

Equity and debt markets rallied on the news.

President Donald Trump, injecting himself not for the first time into the Fed's ostensibly independent deliberations, made clear he wasn't happy, calling the December rate hike wrong-headed.

The Fed also showed nervousness when it announced, at the conclusion of its two-day policy-making committee meeting, that it would very shortly curtail the shrinking of its balance sheet.

Fed Chairman Jerome Powell explained the about -face, which he called a "wait and see approach", saying that, while fiscal stimulus boosted the economy in 2018, there had been "data arriving since September suggesting that growth is slowing somewhat more than expected". "The Fed did a big about-face on policy".

The decision to halt rate hikes will likely please President Trump, who, following the Fed's December announcement, lambasted Chairman Jerome Powell for threatening the bull market he's enjoyed since taking office. "The Fed will be optimistic - but not overly optimistic - to send a neutral but upbeat message to the market", said David Madden, an analyst at CMC Markets in London.

That view is supported by the CME Group, which tracks trading in futures contracts on the Fed's benchmark rate.

However, it wasn't until Wednesday that the Fed got an opportunity to publish a fresh version of its quarterly dot-plot, which reflects FOMC members' projections for the main interest rate over coming years in both graphs and tables.

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