Fed’s Chairman Jerome Powell has commented that the central bank has no bias as to whether the next interest rate move will be up or down, but his colleagues are expected to deliver a more aggressive message.
The committee is expected to forecast one interest-rate increase during 2019, and one more in 2020 which is a downgrade on the two proposed for 2019, back in December. Furthermore, the committee is set to add importance to remaining patient regarding future adjustments as well as announcing the end of reducing its $4 trillion balance sheet.
The forecasts from the upcoming report could dampen investors expectations that the Fed may end rate hikes . The two-year U.S Treasury yield have fallen 0.5% since November as growth has slowed globally and central banks are less confident on their outlooks. Many investors may have misjudged the Fed’s tightening plans, and they could announce plans for one or two further hikes this year that may surprise many investors.
Whilst the FOMC may well closely mirror January’s statement, current economic conditions could be lowered. One key indication will be the median economic growth forecast which is likely to be cut to 2.2 percent from 2.3 percent from December and at the same time unemployment could creep higher.
The markets will be looking for changes in the Fed’s tone, as recent data has been unstable suggesting that the Fed could be facing uncertainty regarding the recovery rate and inflation. Global growth has slowed as shown with the recent announcement from the European Central Bank that has cur its forecasts and subsequently implemented a new round of stimulus.
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