Fed set to leave interest rates unchanged, may hint at June hike

WASHINGTON • The Federal Reserve is expected to hold interest rates steady at its meeting this week as it pauses to parse more economic data but may hint it is on track for an increase in June.

The US central bank is scheduled to release its policy decision at 2pm local time on Wednesday at the conclusion of its two-day meeting.

Fed chairman Janet Yellen is not due to hold a press conference.

Most policymakers have already made plain that the Fed feels more confident in its forecast of two more rate increases this year.

"The bar to disrupting the Fed's plans is higher now than it was in previous years," said Mr Michael Gapen, chief economist at Barclays in New York, in a note to clients.

The Fed is in its first tightening cycle in more than a decade.

A quarter percentage point increase last December was followed two meetings later by another hike in March.

Economists see little chance of a move at this week's meeting. Investors next see a rate rise in June, according to Fed futures data compiled by the CME Group.

The rate-setting committee also is still waiting to see to what extent the Trump administration policies on tax, spending and regulation will be able to get through Congress. A stimulus package could speed up the pace of hikes.

Since the last meeting, economic data has been mixed. The economy grew at a sluggish 0.7 per cent annual pace in the first quarter as consumer spending almost stalled. But a surge in business investment and the fastest wage growth in a decade suggest activity will regain momentum as the year progresses.

Policymakers are also gearing up to announce this year when and how the Fed will begin shrinking its US$4.5 trillion (S$6.3 trillion) balance sheet, minutes from the March meeting show.

REUTERS

A version of this article appeared in the print edition of The Straits Times on May 03, 2017, with the headline 'Fed set to leave interest rates unchanged, may hint at June hike'. Print Edition | Subscribe