Economic News

Federal Reserve Seems Unlikely to Raise Rate This Year

Over the past year, one recurring economic story has revolved around the Federal Reserve. That’s because the central banking system spent 2018 slowly raising interest rates from their historically low levels — much to the dismay of the President. Although that trend was expected to extend into this year, it now seems that may not happen after all.

At a meeting on Wednesday, not only did the Federal Reserve vote to keep interest rates where they are but also signaled that it wouldn’t raise interest rates this year. Previously — as recently as December — the Fed had forecasted that it would hike rates at least twice in 2019. Instead chairman Jerome Powell said in a press conference that it was “a great time to be patient.”

While one might assume that the market would react positively to the news considering the way stocks tended to dip following past rate hikes, it actually didn’t do much to encourage investors. Instead, as MarketWatch explains, some worried about what led to the Fed’s decision. For example, Andrew Brenne of NatAlliance Securities notes, “Equity markets are wondering what the Fed is seeing they are missing.” As a result, at market close, the Dow was down 141 points while the S&P 500 was off by 8 points. Meanwhile the Nasdaq gained a mere .065% (5 points) for the day.

As for what the Fed actually had to say about the economic outlook, they did note that the U.S. labor market “remains strong.” However they went on to cite slowing growth in the Q4 2018, complete with lowered consumer spending and business investments. What does it all mean? According to Powell, nothing much yet. He told reporters, “Data we’re seeing are not currently sending a signal … And when they do clarify, we will act appropriately.”

One person who was likely pleased with the Fed’s decision is President Trump. The Commander in Chief had previously railed against his appointee Powell as rates rose. In fact, just before the Fed voted to increase interest rates 0.25% back in December, Trump tweeted “It is incredible that with a very strong dollar and virtually no inflation, the outside world blowing up around us, Paris is burning and China way down, the Fed is even considering yet another interest rate hike. Take the Victory!” Surprisingly the President hasn’t tweeted about Powell of the Federal Reserve since Wednesday’s meeting.

The Fed’s dovish tone Wednesday is mixed bag for investors. While the lack of rate hikes may be music to some ears, the reasons behind the decision are less pleasing. Of course, as we’ve seen, things can always change so stay tuned.