WASHINGTON – The United States’ Federal Reserve left on Wednesday its benchmark interest rate unchanged at a target range of between 2.25 percent and 2.5 percent and predicted that it will stay at that level for the remainder of the year.
The Federal Open Market Committee (FOMC), the central bank’s monetary-policy making body, said in a statement after a two-day meeting that the decision was due to a slowdown in growth.
“Information received since the Federal Open Market Committee met in January indicates that the labor market remains strong but that growth of economic activity has slowed from its solid rate in the fourth quarter,” the statement read.
Fed Chairman Jerome Powell also hinted at a lengthy pause in the central bank’s program of rate hikes that began in late 2015, when the federal-funds rate was lifted from the near-zero level that had been in place since the 2008-2009 global recession.
“It may be some time before the outlook for jobs and inflation calls clearly for a change in policy,” Powell said at a news conference after the FOMC’s meeting.
“It’s a great time for us to be patient,” he added after the unanimous 10-0 decision by that body, which he chairs.
The decision to leave rates unchanged was widely expected, but the FOMC raised eyebrows with its expectations for the timing of future interest-rate hikes and its economic projections.
The committee’s “dot plots,” included in a release on the Fed’s economic projections, showed that most of the FOMC’s voters (11 out of 17) estimate that the federal-funds rate’s target range will stay at its current level for the rest of 2019.
A minority (seven out of 17) expect rate hikes to remain on hold next year as well.
The central bank also left interest rates unchanged at its first policy meeting of 2019 in late January by a unanimous vote.
The Fed raised the federal-funds rate four times last year; the last time it did not raise the target range for its benchmark rate during an entire calendar year was 2014.
The central bank also said Wednesday that it expects US gross domestic product (GDP) to grow by just 2.1 percent this year, down from 2.3 percent in its December projection. Looking further ahead, the Fed said it expects the economy to expand by just 1.9 percent and 1.8 percent in 2020 and 2021, respectively.
The Federal Reserve is projecting a headline inflation rate of 1.8 percent in 2019, down from a December inflation projection of 1.9 percent. It then sees inflation coming in at 2 percent in both 2020 and 2021.
The headline unemployment rate will inch up in the coming years, according to the Fed, which is projecting a jobless rate of 3.7 percent this year, 3.8 percent next year and 3.9 percent in 2021.
Those numbers are up slightly from the December projection (3.5 percent, 3.6 percent and 3.8 percent, respectively).
The US’s headline unemployment rate edged down to 3.8 percent in February, although only 20,000 new jobs were created last month in the world’s largest economy, the Labor Department reported on March 8.
Many economists see the February jobs figure as the latest sign of a broader US economic slowdown.