US Federal Reserve leaves rates unchanged and blows increases for this year completely. Monetary leaders surrounding Fed chief Jerome Powell left the key rate on Wednesday in the range of 2.25 to 2.5 percent. At the same time, they signaled in their updated outlook that 2019 should not be a step up. Only 2020 would possibly follow an increase. Many traders had already prepared themselves for 2019, due of the uncertain economic outlook, that there would be no increase. The Fed had announced two more steps up for 2019 at their most recent rally in December, sending down Wall Street.
The Fed also decided to phase out the reduction of its balance sheet until September, if the economy and conditions in the financial markets develop as expected. In the meantime, the Fed’s portfolio had grown to around $ 4.5 trillion through asset purchases in the fight against the recent economic crisis. Meanwhile, it was again evaporated to under four trillion dollars.
The US stock exchanges made up for the interest rate decision. Both the S&P 500 and the Nasdaq exchange returned to positive territory following losses before the Fed announcement. The US President Donald Trump pushed several times to suspend the interest rate hike in the past year and even considered expelling Powell. Trump said he needed low interest rates to react flexibly to fluctuations in the global economy. In addition, it will give American companies cheaper access to new cash resources, thereby boosting the economy. The Fed, on the other hand, wants to keep inflation low, ensuring full employment and stable prices.
The Fed is now putting pressure on its brakes even when tightening monetary policy. During the boom phase, the central bank had started repelling bonds bought back during the crisis – worth $ 30 billion a month. This program should now be slowed down significantly from May – to 15 billion dollars per month. It should be completely discontinued by the end of September. This leaves the Fed considerably more money in the markets.