The Federal Reserve of the US kept interest rates stable on June 19, but noted possible cuts in rates of up to half a percentage point for the rest of this year, as it responded to greater economic uncertainty and a drop in expected inflation.
The US central bank said it “will act as appropriate to sustain” the economic expansion as it approaches the 10-year mark and dropped a promise to be “patient” in adjusting rates.
The US central bank said he would “act accordingly to sustain” the economic expansion as he approaches 10 years and set aside the promise to be “patient” when adjusting rates.
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Nearly half of its lawmakers now show a willingness to reduce borrowing costs in the next six months.
While new economic projections showed that legislators’ views on growth and unemployment remained virtually unchanged, they saw headline inflation at only 1.5 percent for the year, down from the projected 1.8 percent in March.
They also hope to lose their inflation target of 2 percent next year.
Seven of the 17 policymakers said they expected it to be appropriate to reduce rates by half a percentage point by the end of 2019, and an eighth saw a quarter-point cut in rates, as appropriate.
That was not enough to change the median outlook of the FED’s one-day loan rate, which officials projected will remain in the range of 2.25% to 2.50% for the rest of this year.
But it still represented a significant change of views on the Federal Reserve. It seemed that many, and perhaps most, policy makers cut a full half percentage point off their outlook for rates. Only one policy maker continues to see such a likely rate hike in 2019.
The Fed continued to regard the labour market as “strong” and said “sustained expansion of economic activity” and eventually rising inflation were still “the most likely outcomes.” The drop in inflation, however, was a blow for a central bank hoping to reach its target sometime next year.St Louis Fed President James Bullard, who had argued that rates should be cut, dissented in the policy decision.