A two-day policy meeting that started on Tuesday is expected to end with the U.S. Federal Reserve policymakers deciding to leave interest rates unchanged for the short-term.
U.S. Federal Reserve Policymakers to Leave Short-Term Interest Rates Unchanged
In December, the U.S. central bank increased borrowing costs for the first time in close to a decade. However, policy makers have been cautious lifting rates further due to the uncertainty that slower economic growth in Europe and China could have on the US economy.
Strong data coming from the US including accelerated job growth in recent months has eased fears that a slow global economy could impact the American economy.
According to Goldman Sachs economists Jan Hatzius and Zach Pandl, the tightening financial climate at the start of the year was the greatest risk facing the US economy. As such, it is likely that the Fed will announce its plans to continue to raise interest rates further in the next quarter.
It is expected that the Fed officials will announce two or probably three interest rate hikes in the course of this year as opposed to the four rate hikes for 2016 that were envisioned last December.
The Fed’s anticipated decision to slow down the rate hikes could be a reflection of their decision to put on hold policy for a while to assess the global and American economic outlook.
Following the last Fed meeting, inflation in the US is gradually stabilizing; with the Dallas Fed showing that inflation had risen to 1.9%, which is significantly close to the targeted 2% in 2.5 years. At the same time, the unemployment rate in the U.S. stood at 4.9% as of February, a level that most Fed officials concur indicates full employment.