Federal Reserve’s policy meeting on Wednesday won’t bring any change to the current interest rates. Janet Yellen, the Federal Reserve chair is expected to release a statement, but there won’t be any news conference later. The US economy is set for a steady gain this year, but there is also a lot of uncertainty surrounding the new White House administration headed by Donald Trump. Amidst uncertainty, the Fed doesn’t want to bring about radical changes which can influence the economy even deeper.
Experts suggest that Fed will take more time in making a decision, but it will closely monitor the progress of the economy. The Fed hopes for a gradual pace as far as interest rate hikes are concerned. By the end of 2016, Fed introduced an interest rate hike and said that there will be three more upcoming hikes in the future. The markets rallied in hopes of increased interest rates. However, the political situation in the country has changed and the Fed wants to take steps cautiously.
Economic analysts predict that the Fed will prepare itself for interest rate hikes, but no announcement will be made soon. The two day policy meeting will not bring about major changes in the economy. The policy statement that would be released after the meeting would be seriously investigated to figure out signals of the further actions of the Fed. Many industry experts believe that the Fed won’t make changes to the interest rates even during March.
President Donald Trump has several ambitious goals and the Fed is unsure how the economy will be affected by the proposed changes. The president is eager on cancelling and rewriting trade deals which will influence the economy and investor decisions deeply. Some analysts also feel that the central bank could send any signal of interest rate hikes sooner rather than later. Until now, Fed has been claiming that the economic outlook is roughly in balance. If the statement is changed to even mean that the economy appears in balance, it could signal a change in the interest rates.
The Chair Janet Yellen usually sits for news conference and provides economic forecasts four times per year. The policy meeting on Wednesday will not result in both updates. In December 2016, the interest rate was increased much beyond the record low of near zero level which was maintained for the past seven years. The interest rate was lowered after the Great Recession and economic financial crisis in 2008.
The outlook of Federal Reserve to increase the interest rates is severely dampened by the aggressive polices of Trump. Nobody is sure of the program and experts can’t conclude whether the program will be approved by the congress. The impact of new administrative policies on the economy is yet to be known. While the fiscal spending and tax cuts could boost economic growth, imposing new tariffs on Mexico and China could create trade imbalance affecting imports and exports. The economy is currently healthy despite the lower GDP figures of last year.