Here comes the Fed…

  • The Federal Reserve is widely expected to hold interest rates steady Wednesday.
  • With forecasts for slower growth this year, focus will be on signals for future policy moves.
  • Some expect the central bank’s next policy move could be a rate cut.

The Federal Reserve is widely expected to hold interest rates steady on Wednesday and to signal further that it could be awhile before another increase.

Focus will be on whether the central bank changes its outlook for the economy. Officials last forecast 2.3% growth this year, but a string of surprisingly soft economic data in recent months has added to expectations about a slowdown.

“We do expect the Fed to tone down its description of household spending and inflation,” said Joe Brusuelas, chief economist at RSM. “It would not be surprising to observe a shift in language around inflation expectations, as having drifted down in recent months.”

The 12-member Federal Open Market Committee last voted to increase its benchmark interest rate by a quarter percentage point, bringing it to a target range of between 2.25% and 2.5% at the end of 2018.

Officials have since then signaled they would take a more cautious stance toward monetary policy, citing several new strains as they dropped a reference to “further gradual increases” at the last meeting in January. As stimulus fades and global trade tensions continue, some even see lowering borrowing costs as the next policy move.

“With economic growth slowing below trend and inflation subdued, we think that the Fed’s next move will be to cut rates in early 2020,” said Andrew Hunter, an economist at Capital Economics.

The central bank is also expected to reveal details on plans to hold a larger balance sheet than previously expected. In 2017, officials began reducing the $4.5 trillion portfolio of US Treasury debt and other assets it amassed following the financial crisis.

The FOMC is set to announce its decision at 2 p.m. ET., with a press conference to be held shortly thereafter.