The Fed has decided to keep interest rates unchanged during its two-day meeting and vowed that a future monetary policy change will be carried out patiently and in terms of how the economic conditions are developing, CNBC reported.
Bankers from the central bank voted unanimously to keep interest rates between 2.25% and 2.5%.
In a statement after its two-day meeting, the Federal Reserve said economic growth remains "solid" and expects growth to continue.
In the current statement of the Fed there is no phrase that has been constantly present in the past few years, namely "further gradual increase" of interest rates. Now this expression is replaced by "taking a more careful approach". This means that the Federal Reserve is ready or to increase or decrease interest rates according to the economic conditions, media media say.
Boosting its cautious tone, the Fed said it was ready to postpone or even cease to terminate the bond portfolio. This also marks a remarkable change. In December, the Federal Reserve said it was committed to reducing its portfolio at a steady pace.
From information on the Federal Reserve's website, it is clear that it is possible to consider the possible downgrade of the central bank's bond portfolio if the conditions so require.
"In the light of the global economic and financial perspective and weak inflationary pressures, the Fed will be patient in determining interest rates in the future," the statement said.
The move comes after a turbulent market reaction that began in early October. Then the Federal Reserve Governor Jerome Powell said the central bank was far from a neutral interest rate. It rocked Wall Street and sent the markets to a spiral that quickly led them to the sword territory.
The reaction of the investors was negative, when in December, the Fed signaled that there would be a double increase in interest rates in 2019. Markets only subsided when Fed officials, including Paul, said the central bank would be patient and flexible in its approach to raising interest rates.
The economic fundamentals of the US economy remain strong, the Federal Reserve announced in the so-called Beige Book, which was released earlier this month. Unemployment was only 3.9% in December, and wages increased by 3.2% in 2018. The growth in consumer prices remains weak. After the exclusion of the variable food and energy components, the core inflation, the Fed's preferred measure, in November increased only by 1.9% compared to the previous year. Core inflation excludes unstable food and fuel prices, as well as regulated prices such as electricity.
Central bankers and market analysts expect growth to slow in 2019, but remain strong and continue to generate jobs and reduce the unemployment rate.
The Fed stashed projections of economic growth and inflation in the United States in 2018 and 2019 at a December meeting. Current expectations are for economic growth of 3% in this and 2.3% in 2019, with respectively 3.1 and 2.5% at the September meeting. The Federal Reserve predicts inflation in 2018 and 2019 will be 1.9%. For comparison, previous estimates showed 2.1 and 2% respectively for this year and the following year.
The central bank raised interest rates four times last year in conditions of sustained economic growth and unemployment, which reached its lowest level in half a century.