WASHINGTON — The Federal Reserve’s Open Market Committee is indicating it’s unlikely it will move to raise rates in 2019—or even raise rates by much through 2021.
This is a strong departure from many forecasts as recent as just a few months ago, when most analysts were predicting the Fed would move twice to raise rates this year.
But a statement issued at the conclusion of the FOMC’s meeting here shows increasing concern over a slowing economy. The FOMC, which left rates untouched at 2.25% to 2.5%, said the “growth of economic activity has slowed from its solid rate in the fourth quarter.” The Fed pointed to data showing a decline in both household spending and business fixed investment, saying it now expects economic growth of 2.1% in 2019, down from the 2.3% it was forecasting in December of 2018.
According to the Fed, its members are now projecting a single rate increase at some point in 2020, and no increases in 2021.
T-Bill Yields Decline
Following the announcement, yields on the 10-year Treasury note — a bellwether for a range of consumer borrowing rates — declined sharply to just below 2.54%, the lowest level since January 2018. The news lifted stocks, however.
According to the Fed, 11 committee members do not expect any rate increases this year, and four said they expect one. None expected a rate cut.
For 2020, seven members indicated they still expected no additional rate increases, while four expected one total increase from the current level. Three expected two increases, and three others expected three or four increases.
In addition, Fed officials said they plan to end their efforts to shrink the Fed’s huge holdings in government-backed securities in September, after slowing it down in May.