Today, March 20, the Federal Reserve left benchmark interest rates at the current 2.25% to 2.5% range at the meeting of the Open Market Committee, but cut its forecast for U.S. economic growth in 2019 and voiced concern about slowing consumer and business spending.
The U.S. central bank reduced its forecast for 2019 growth in U.S. GDP to 2.1% from the 2.3% growth forecast in December.
All those worries, however, were outweighed by a dot plot that showed the consensus at the Fed was to leave interest rates unchanged for the rest of 2019. That call for no interest rate increases in 2019 contrasts with the two interest rate increases in the dot plot consensus in December.
And by the announcement that in September the Fed would end its program of reducing its balance sheet by allowing the run off of maturing Treasures at a rate of $50 billion a month. Letting Treasuries in its portfolio mature without buying new Treasuries is equivalent to a tightening of the money supply each month. Ending this run off in maturing Treasuries is consistent with a Fed that’s worried about a slowdown in the economy.
U.S. stocks had been modestly lower before the Fed announcement with the Standard & Poor’s 500 down 0.49% as of 1 p.m. New York time and the Dow Jones Industrial Average lower by 0.62%. After the Fed announcement, the S&P 500 recovered to show a loss of just 0.08% as of 3:30 p.m. New York time. The Dow moved into the black, up 0.28%. The NASDAQ Composite was up by 0.20% as of 3:30 p.m. and the Russell 2000 small cap index was just in the black with a gain of 0.03%.
