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Federal Reserve Keeps Rates Steady, but Opens Door to Easing

Economy Jun 19, 2019 02:30PM ET
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Investing.com - The Federal Reserve kept interest rates unchanged Wednesday, but signaled it was prepared to lean toward a more dovish stance as uncertainties in its growth outlook have increased.

The Federal Open Market Committee kept the fed funds rate in a range of 2.25% to 2.5%..

In a sign that the Fed is laying the groundwork for more accommodative policies, the central bank ditched "patient" from its policy language and said it would "act as appropriate to sustain the expansion."

"The Committee continues to view sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective as the most likely outcomes, but uncertainties about this outlook have increased," the Fed said.

At his press conference, Federal Reserve Chairman Jerome Powell conceded there were some significant changes to the Fed's policy statement, but suggested that the central bank was in no rush to cut rates.

"I don't think the risk of waiting too long (to cut rates) is prominent right now," Powell said.

Members of the rate-setting committee kept their 2019 median forecast for interest rates at 2.4%. But the interest rate outlook for both 2020 and 2021 was lowered, guiding to at least one rate cut next year.

The longer-run interest rate was cut to 2.5% from 2.8%.

For decades the Federal Reserve has operated under a dual mandate seeking to achieve maximum employment while ensuring inflation remains steady. But inflation continues to elude the Fed's 2% target, giving the central bank reason to tilt dovish.

The economy is expected to grow by 2.1% in 2019, unchanged from previous estimate of 2.1% , and by 1.9% in 2020, down from 1.9% previously, the Fed's Summary of Economic Projections showed.

The pace of inflation, which has longed lagged the Fed's 2% target, is forecast to cool to a rate of 1.5% this year, down from 1.8%. Core PCE inflation for 2020 was also revised lower to 1.9% from 2.0%.

The most recent measure of core PCE, the Fed's preferred measure of inflation, stood at 1.6%.

"The fact core inflation is underperforming the target is suddenly a big problem and only massive easing might do something about proving the 2% goal to be a symmetrical target," Scotiabank said in a note.

The unemployment rate, which remains at multi-year lows, was revised downward for 2019 to 3.6% from 3.7% previously.

Federal Reserve Keeps Rates Steady, but Opens Door to Easing
 

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Comments (17)
Hank Williams
Hank Williams Jun 19, 2019 8:20PM ET
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Inflation is coming.
bomz bomzov
bomz bomzov Jun 19, 2019 6:01PM ET
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it is the fusion of the legislative and judicial branches of power creates the major contemporary problems of the United States. in particular, the law enforcement system no longer works to prevent crime, but lawyers are charged with the fees and earnings of private prison contractors. in violation of the 8 constitutional amendments, disproportionate punishments are applied, leading to an increase in the severity of average misdemeanors. crime has reached the scale of hostilities, so that black citizens are afraid to go out.
Ranjit Elmer Limos
Ranjit Elmer Limos Jun 19, 2019 6:01PM ET
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Conspiracy Theorist
Ranjit Elmer Limos
Ranjit Elmer Limos Jun 19, 2019 6:01PM ET
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Conspiracy Theorist =D
bomz bomzov
bomz bomzov Jun 19, 2019 6:01PM ET
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Ranjit Elmer Limos  declaration of independence is conspiracy theories too
Leo Woodsman
Leo Woodsman Jun 19, 2019 4:01PM ET
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2->0.5 cut
bomz bomzov
bomz bomzov Jun 19, 2019 4:01PM ET
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0.25x4 cut, as minimum
Michael Kim
Michael Kim Jun 19, 2019 3:33PM ET
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Growth / interest rate = P/E?
John Tierney
John Tierney Jun 19, 2019 2:58PM ET
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Welcome to a 20 year bull market
bomz bomzov
bomz bomzov Jun 19, 2019 2:48PM ET
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Powell may be replace with a computer
Hafiz Calaypso
Hafiz Calaypso Jun 19, 2019 2:38PM ET
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what happen to the stock market ?
bomz bomzov
bomz bomzov Jun 19, 2019 2:38PM ET
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he will stand without regard to any reserves
Hafiz Calaypso
Hafiz Calaypso Jun 19, 2019 2:38PM ET
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bomz bomzov
bomz bomzov Jun 19, 2019 2:37PM ET
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non-state payment instrument like bitcoin.
Itachi Uchiha
Vi5uAnalyst Jun 19, 2019 2:37PM ET
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Electroneum ETN
Mojo Snake
Mojo Snake Jun 19, 2019 2:31PM ET
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As long as the market does fine on Hopium there is no need to lower rates.  Keep pumping Bulls I'm sure he will do it in July.  LOL
Steven Chen
Gamer_LG Jun 19, 2019 2:30PM ET
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get ready for another round of 4 trillion QE 2020.
 
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