Fed Likely to Stay Patient             03/20 06:28

   The Federal Reserve is expected to end its latest policy meeting Wednesday 
by refining its new overarching message that it plans to be "patient" about any 
further interest rate hikes.

   WASHINGTON (AP) -- The Federal Reserve is expected to end its latest policy 
meeting Wednesday by refining its new overarching message that it plans to be 
"patient" about any further interest rate hikes.

   The Fed is all but sure to keep its key short-term rate in a range of 2.25 
percent to 2.5 percent, still low by historical standards. And most analysts 
think the policymakers will scale back their projection of rate hikes this year 
from two to one or perhaps even none.

   The central bank's new theme of patience and flexibility reflects its 
calming response since the start of the year to slow economic growth at home 
and abroad, a nervous stock market and persistently mild inflation. The Fed 
executed an abrupt pivot when it met in January by signaling that it no longer 
expected to raise rates anytime soon.

   The shift toward a more hands-off Fed and away from a policy of steadily 
tightening credit has pleased investors and encouraged the view that the 
central bank is done raising rates for now and might even act this year to 
support rather than restrain the economy.

   Besides issuing a new policy statement Wednesday, the Fed will provide an 
updated economic outlook and Chairman Jerome Powell will hold a news 
conference. Powell is expected to note that while the U.S. economy is on firm 
footing, it faces risks from slowing growth and trade conflicts. Against that 
backdrop, the thinking goes, it would be unwise to keep raising rates.

   There is also anticipation that the Fed will specify when this year it 
expects to stop shrinking its huge portfolio of bonds, part of its balance 
sheet. Doing so would help keep a lid on loan rates.

   All of which suggests that the Fed may recognize that it went too far after 
it met in December. At that meeting, the Fed approved a fourth rate hike for 
2018 and projected two additional rate increases in 2019. Powell also said he 
thought the balance sheet reduction would be on "automatic pilot."

   That message spooked investors, who worried about the prospect of steadily 
higher borrowing rates for consumers and businesses and perhaps a further 
economic slowdown. The stock market had begun falling in early October and then 
accelerated after the Fed's December meeting.

   President Donald Trump, injecting himself not for the first time into the 
Fed's ostensibly independent deliberations, made clear he wasn't happy, calling 
the December rate hike wrong-headed. Reports emerged that Trump was even 
contemplating trying to fire Powell, who had been his hand-picked choice to 
lead the Fed.

   But after the December turmoil, the Fed in January began sending a more 
comforting message. At an economic conference soon after New Year's, Powell 
stressed that the Fed would be "flexible" and "patient" in raising rates --- a 
word he and other policymakers have invoked repeatedly since --- and "wouldn't 
hesitate" to change course if necessary.

   Powell, appearing last week on CBS's "60 Minutes," denied that pressure from 
Trump had influenced the Fed's policy shift. Private economists generally agree 
that a slowing economy and a sinking stock market, which eased Fed worries 
about any possible stock bubble, were more decisive factors.

   Economists expect the Fed's updated forecasts to downgrade its estimate of 
growth in light of a slowdown in manufacturing and retail, sluggish housing and 
construction activity and global pressures, including an ongoing trade war.

   After sharply falling in December, stocks have rallied and recouped most of 
their late-year losses in trading since the start of 2019, a rebound credited 
larger to the Fed's easier monetary stance.

   Some analysts say they think the Fed won't raise rates at all this year if 
the outlook becomes as dim as they are forecasting.

   That view is supported by the CME Group, which tracks trading in futures 
contracts on the Fed's benchmark rate. It says traders now put the probability 
of any Fed rate hike this year at zero and project a one-in-four chance that 
the Fed will actually cut rates by year's end to help prevent a slowing economy 
from toppling into a recession.


(CZ)