The Federal Reserve voted to keep the benchmark federal funds rate steady during its second policy meeting of the year on Wednesday, also signaling that there will be no hikes for the remainder of 2019.
The measures, announced following the end of a two-day policy meeting, mean the Fed's gradual and sometimes fitful efforts to return monetary policy to a more normal footing will stop well short of what was foreseen in late 2015 when the central bank first moved rates from the near-zero level adopted in response to the 2007-2009 financial crisis and recession.
Rates are now seen peaking at 2.6 percent, sometime in 2020, roughly a percentage point lower than the historic average for the fed funds rate and a sign that the USA economy has entered a more sluggish era.
The media projection of Fed policymakers for economic growth in 2019 fell to 2.1 from 2.3 in December, while the outlook for unemployment climbed from 3.5 to 3.7.
In its statement following a two-day meeting in Washington, the Federal Open Market Committee repeated January language that it will be "patient" amid "global economic and financial developments and muted inflation pressures". Trump has repeatedly criticized the Fed in recent months for its decision a raise interests rates under the lead of his appointee, Chair Jerome Powell.
Bond prices rose sharply Wednesday after the Fed forecast slower economic growth.
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That reflects a slow start to 2019, with the Atlanta Fed's tracking estimate of growth at less than 1 per cent, as well as continuing headwinds, from a battle over trade tariffs and the delayed impact of past rate hikes.
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Expectations for an interest-rate hike this year have fallen below those for a cut.
The combined announcements mean that, after tightening monetary policy with two levers at once over the past year, the Fed is now pausing on both fronts to adjust to weaker global growth and a somewhat weaker outlook for the USA economy.
"The data are not now sending a signal that we need to move in one direction or another, in my view", he said.
Benchmark U.S. stock market indexes swung higher after the Fed's statement was released, and key Treasury security yields dropped to the lowest since early January.
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"What we are seeing is the market positioning for potentially a more dovish tone tomorrow", said Minh Trang, senior currency trader at California's Silicon Valley Bank, speaking about expectations of what the Fed's statement will be like on Wednesday.
Critics warned the Fed's decision to effectively give up on its policy normalisation strategy could leave policy makers with less scope to stimulate the USA economy if fears of a recession are realised.
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.
The new economic projections showed weakening on all fronts compared to the Fed's forecasts from December.
"Growth of economic activity has slowed from its solid rate in the fourth quarter", the Fed said.
The new projections amounted to a wholesale downgrade of the Fed's outlook, with at least nine of its 17 policymakers lowering their expected rate path and collectively shaving a full half of a percentage point off the expected fed funds rate at the end of this year.
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Inflation for the year is now seen at 1.8 percent, compared to the December forecast of 1.9 percent.