Fed hikes? Global economy would dictate it
Investors are now putting the odds at one in three that the Fed will reverse directions and begin cutting interest rates in the next 10 months.
Washington - Fed chairman Jerome Powell due to announce second policy decision of 2019 on Wednesday
There is virtually no chance the US Federal Reserve will raise interest rates in the coming week, since policymakers have all but promised to hold their fire as the global economy slows.
With inflation still tame as US economic growth decelerates in 2019, economists also say Fed officials will once again lower the number of rate hikes they expect this year, from the two projected in December.
Fed chairman Jerome Powell is due to announce the second policy decision of the year on Wednesday by the rate-setting Federal Open Market Committee.
And investors now put the odds at one in three that the American central bank will reverse directions and begin cutting interest rates in the next 10 months.
Some economists warn that is unlikely: with unemployment falling and eventually pushing wages higher, inflation might rear its head as soon as the summer, compelling the Fed to act.
But in congressional testimony last month, Powell said he anticipates low energy prices will drive inflation even further below the Fed's 2 per cent target, at least for a "for a time".
Other influential players on the FOMC have likewise chimed in, calling for caution: New York Fed president John Williams said this month he expects economic growth to slow "considerably" this year.
And Fed Governor Lael Brainard said it was time for "a period of watchful waiting" on policy.
Her remarks marked a significant change: Six months earlier, Brainard - known as a "dove" who is less aggressive on raising rates - suggested the Fed would continue raising rates through 2019, not pausing to stop at "neutral," the rates that neither stimulates nor slows the economy.
"It's a completely different world," Kathy Bostjancic, head of US macro investors services at Oxford Economics, told AFP.
"I think they've been surprised that inflation hasn't moved higher."