Fed Reserve Likely to Keep Rates Steady Over Economic Uncertainties

On Wednesday, the U.S. Fed Reserve is anticipated to keep interest rates steady in its first policy decision as the central bank awaits for more clarity on economic policies since President Donald Trump took office.


arthur-3On Wednesday, the U.S. Fed Reserve is anticipated to keep interest rates steady  in its first policy decision as the central bank awaits for more clarity on economic policies since President Donald Trump took office.

President  Trump has guaranteed a large infrastructure spending program, tax reductions, a rollback of regulations and a renegotiation of trade contracts, but has only presented few information or a timeline for their roll out since his victory.

The current policy decision of central bank is set to be released at 2 p.m. EST (1900 GMT) on Wednesday at the end of a two-day meeting..

The policy decision will come a week after  Fed Reserve  Chair  Yellen highlighted that the U.S. economy is close to full employment and advised of a “nasty surprise” on inflation if the central bank is too slow with its rate hikes. Yellen is not scheduled  to hold a press conference

Economist surveyed have all but stop considering  a rate hike at this week’s meeting.  Investors anticipate next  interest rate hike in June, according to Fed futures data compiled by the CME Group.

The Fed Reserve raised its benchmark interest rate at its previous policy meeting in December, the second policy amendment in a decade, to a target range between 0.50% and 0.75%. It forecasted additional three rate increases in 2017 after its meeting last December.

On Additional News

In spite of positive U.S. economic data, Fed policymakers are currently delayed in evaluating how quickly inflation might increase until they have additional information on Trump’s economic plans.

“At the moment, there’s incredible uncertainty surrounding fiscal policy and the potential for stimulus and the composition of that,” said Paul Ashworth, an economist at Capital Economics. “The Fed can’t react until it knows what to react to.”

With the U.S. economy already bouncing up against full employment, Trump’s promises on fiscal stimulus and tax restructuring could quickly spur higher inflation as would commanding tariffs on Mexican imports. That may lead to Fed  Reserve policymakers to increase rates faster.

The U.S. unemployment rate is 4.7% and business investment has developed, in spite of a slowdown in 4th quarter economic growth initiated mostly by a spreading trade deficit. Consumer expenditure, which accounts for more than two thirds of the nation’s economic activity, increased solidly in December, according to Commerce Department data released on Monday.

In the same report, the Fed’s carefully observed inflation measure also inched up to 1.7 percent.

Other policies, such as an immigration crackdown, violate what the Fed Reserve argues that the U.S. economy needs to progress over the long term.

On Monday, U.S. stocks declined  after Trump cut travel and immigration to the United States from seven predominantly Muslim countries.

The S&P 500 index is still up approximately 6%  since Trump’s victory and the strength of the domestic economy makes the United States increasingly divergent from Japan, the euro zone and Britain, none of which are expected to increase rates anytime soon.

The Fed Reserve will possibly make only minor tweaks in its policy speech on Wednesday to reflect a string of positive latest economic reports.

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