The Federal Reserve will hold its interest rate target steady, the central bank announced after ending its latest policy meeting Wednesday.
Short-term interest rates are expected to remain at their current level of about 1.55% until there is a significant change in the economic outlook.
Economic expectations have changed only slightly since the Fed met in December. Household spending has been rising at a “moderate” pace, the Fed stated Wednesday, as opposed to the “strong” pace it saw in December. Economic growth is expected to grow at a 2% clip for the year and unemployment remains at historic lows.
The decision by Chairman Jerome Powell and the Fed’s monetary policy committee to hold interest rates steady contrasts with a tweet from President Trump on Tuesday calling for a rate reduction. Trump wrote: “The Fed should get smart & lower the Rate to make our interest competitive with other Countries which pay much lower even though we are, by far, the high standard. We would then focus on paying off & refinancing debt! There is almost no inflation-this is the time (2 years late)!”
The Fed should get smart & lower the Rate to make our interest competitive with other Countries which pay much lower even though we are, by far, the high standard. We would then focus on paying off & refinancing debt! There is almost no inflation-this is the time (2 years late)!
— Donald J. Trump (@realDonaldTrump) January 28, 2020
The Fed last cut interest rates in October when there were concerns over the president’s trade policies and slowing economic growth.
Powell, at the press conference, addressed China’s coronavirus outbreak, which has created an unexpected risk for the global economy. Economists are predicting that economic growth in China could dip below 5%, which would send a shudder through financial markets. The Trump administration has told airline executives it is considering suspending all flights from China to the United States amid the escalating outbreak.
Powell deemed the virus a “very serious issue” but stopped short of saying it would significantly affect the global economy.
“There is likely to be some disruption to activity in China and possibly globally based on the threat of the virus today and the travel restrictions and business closures that have already been imposed… [But] it is in its early stages, and it’s very uncertain about how far it will spread and what the macroeconomic affect will be in China,” Powell said.
