United States stock indexes are mostly lower after Fed policy decision

United States stock indexes are mostly lower after Fed policy decision

Fed policymakers project gross domestic product growth to slow to 2.1 percent this year from the previous forecast of 2.3 percent, while the unemployment rate is forecast at 3.7 percent, slightly higher than the December projection.

In contrast to projections through much of past year, Fed policymakers no longer see the need to move rates to a "restrictive" level as a guard against inflation, which remains lodged below the central bank's 2 percent target.

The Fed's signal that it will keep interest rates on hold for the full year reflects concerns that economic growth is slowing, lower energy prices are weighing on inflation and risks from overseas are dimming the outlook.

The Fed announced it was keeping its benchmark rate its current range of 2.25 percent to 2.5 percent and trimmed its expectation of two rate hikes this year to none.

On the losing end, though, are US banks, whose profits can take a hit if the gap between short- and long-term interest rates narrows.

Federal Reserve Chairman Jerome Powell says the central bank has no bias in whether its next move is up or down, but his colleagues may deliver a more hawkish message. Chairman Jerome Powell and other Fed officials have hinted at doing that later this year, but haven't set a date yet.

The Fed's policy statement was unanimous.

Some market players said investors took money off the table after a report of US concerns that China is pushing back against American demands in trade talks. "The question for the market remains whether or not the four rate hikes from a year ago and the unwinding of the balance sheet at the same time could be continuing, even now, to tighten financial conditions".

Uncertainty on the outlook for the world economy and global trade as well as a sharp USA growth slowdown expected by a range of forecasters mean that markets are on a hair trigger for signals from the Fed.

"The data are not now sending a signal that we need to move in one direction or another, in my view", he said.

PRESSURE DROP: Treasury yields sank sharply following the Fed's announcement, and the 10-year yield touched its lowest level in more than a year. The dollar weakened broadly against major trading partners' currencies.

Joe Manimbo, senior market analyst at Western Union Business Solutions, said: "The Fed did a big about-face on policy".

So even as the president and his administration try to cheer the success of his economic policies - most notably, the 2017 tax cut - the independent experts at the Fed, led by his hand-picked chair, disagree with their rosy predictions.

The forecasts could throw cold water on investors' expectations that the Fed has ended rate hikes.

The new economic projections showed weakening on all fronts compared to the Fed's forecasts from December.

Inflation for the year is now seen at 1.8 per cent, compared to the Fed's forecast in December of 1.9 per cent.

"Recent indicators point to slower growth of household spending and business fixed investment in the first quarter. overall inflation has declined".

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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