The U.S. Federal Reserve will be holding its monetary policy meeting this week on Wednesday, January 30. This meeting comes following the December FOMC meeting. Back then, the central bank hiked the short-term interest rates by a quarter basis point.
The U.S. Fed funds rate currently stands at 2.25% – 2.50%.
No changes should come from the Federal Reserve at this week’s meeting. This comes amid concerns of a slowdown in the U.S. economy and higher interest rates. This can affect the housing markets. Various central bankers ahead of the blackout period indicated that the Fed should be pausing its rate hike plans.
At the December meeting, the FOMC released its economic and rate hike projections. The Fed signaled that they would hike interest rates twice this year, provided that the economy continues to rise steadily.
This puts the June and December meetings into focus, which is when the central bank could potentially hike interest rates.
What about this week’s meeting?
This week’s meeting should be lackluster with no press conference on the agenda. Therefore, the Fed is most probably going to guide the markets on what to expect in the next Fed meeting.
The next central bank meeting will be in March 2019.
Here’s a quick recap of the comments from various central bank governors over the past weeks.
Bullard, St. Louis Fed: James Bullard, president of the St. Louis Federal Reserve and a voting member of the FOMC said early in January that he would support a rate hike only if inflation ticks higher than expected.
Bullard argued against the December rate hike as he reportedly said that he would have tempered the Fed’s statement.
“For right now, the right place is where we are, and we should react to incoming news, not projecting that there are further increases to come,”
Bullard said, noting that the Fed’s interest rates are its primary policy tools.
Clarida, Fed Vice Chair: A FOMC voting member and the vice president of the Federal Reserve, Clarida maintained a similar view expressing concerns on inflation. He insisted that the Fed can afford to remain patient as they assess the incoming data.
More importantly, Clarida said that officials would look into whether the worries of the global slowdown amid tighter financial conditions could pose headwinds for the economy.
“With inflation muted, I believe that the Committee can afford to be patient as we see how the data evolve in 2019 and as we assess what monetary policy stance is warranted to sustain strong growth and our dual-mandate objectives,”
Clarida said, earlier in January.
George, Kansas City Fed: Esther George, president of the Kansas City Federal Reserve also had similar views expressing support for a pause to the rate hikes.
She said that with the U.S. interest rates approaching the neutral rate, there’s no need to rush with rate hikes.
“This year we must acknowledge that rates are approaching, and may be closing in on our destination of neutral,”
She said, speaking at a local event in Kansas.
Williams, NY Fed: John Williams, president of the New York Federal Reserve and an FOMC voting member more recently, said that the central bank must remain patient amid softening growth outlook.
Additionally, Williams expressed that inflation signals stability but noted that it could remain anchored at the 2.0% target level.
“If growth continues to come in well above sustainable levels, somewhat higher interest rates may well be called for at some point. However, if conditions turn out to be less robust, then I will adjust my policy views accordingly,”
With most of the Fed members expressing similar views and the fact that the next FOMC meeting is only scheduled for March, we can expect the fed funds rate to remain at the current levels for the foreseeable future.
By the March meeting, Fed officials will have had enough data to assess. This includes the fourth quarter GDP data that provides a lot more insight into how the U.S. economy is faring.
However, any potential rate hike should occur in June, which will give the central bank even more data to assess, such as the first quarter 2019 GDP figures which could provide a more current picture of the economy.