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Experts Sound Off on Fed Rate Decision

Fed RatesOn Wednesday the Federal Open Market Committee (FOMC) announced that the Fed does not intend to raise rates this year, keeping interest rates steady at a range of 2.25 and 2.5 percent. In a press conference, Fed Chair Jerome Powell noted solid job gains and low unemployment rates, as well as little change in payroll employment in February.

The FOMC also noted that inflation has declined in the past year, citing lower energy prices, though inflation for items other than food and energy has remained at around two percent. In a statement. The FOMC stated that a rate hike may still be possible.

“The Committee continues to view sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective as the most likely outcomes,” said the FOMC in a statement. “In light of global economic and financial developments and muted inflation pressures, the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes.”

According to LendingTree Chief Economist Tendayi Kapfidze, the Fed’s outlook may be an overreaction resulting from December’s market volatility and the recent government shutdown.

“In our interpretation, the Fed may be overreacting to market volatility that occurred in December and distortions to economic activity and data from the government shutdown,” Kapfidze stated. “While many measures of economic growth have slowed, sentiment data which is more timely has rebounded from those declines. There are also seasonal distortions that have been occurring in the first quarter, with the economy often accelerating in the second and third quarter.”

Kapfidze notes that despite the Fed’s announcement, a rate hike is still possible.

“As a result, we think there remains a possibility for one or two rate hikes in 2019 if growth accelerates back above potential, unemployment remains low and inflation is pushed back towards 2 percent, perhaps by wage inflation,” he continues. “Hikes would occur later in the year, perhaps starting in September if the economy accelerates over the summer.”

About Author: Seth Welborn

Seth Welborn is a contributing writer for DS News. He is a Harding University graduate with a degree in English and a minor in writing, and has studied abroad in Athens, Greece. An East Texas native, he also works part-time as a photographer.
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