Most US Fed officials favour no rate increases in 2019: Minutes

A view of the Federal Reserve building is seen in Washington, DC. PHOTO: AFP

WASHINGTON (AFP) - Most Federal Reserve members believe the central bank should leave US interest rates untouched for all of 2019, citing economic risks brewing abroad, minutes from last month's monetary policy meeting showed on Wednesday (April 10).

However, they also signalled their path could "shift in either direction" - raising the possibility of a rate cut to bolster a slowing economy, something the Fed has not done in more than a decade, according to the minutes, which recorded discussions at the Fed's March 19-20 meeting.

President Donald Trump recently called on the central bank to cut rates.

He has attacked the Fed as "crazy" for pursuing a course of four rate increases last year.

But in the mix of views among policymakers, the minutes released on Wednesday showed that others said raising rates "modestly" later in 2019 could still be appropriate if the US economy continues to grow faster than its longer-term trend.

After raising rates four times in 2018, the Fed last month slashed its forecast for the number of rate increases to zero.

The Fed's caution was inspired by signs of a slowing US economy in the first quarter, especially in consumption, but also a fear of "significant negative effects" from trade tensions and international developments such as Brexit.

This left the outlook balanced between caution and optimism, with "most" participants believing the weakness in consumer spending - a central driver of the US economy - would not last "beyond the first quarter."

The pause in rate hikes has cheered markets and the International Monetary Fund this week cited it as one reason global economic growth may show resilience into 2020.

According to the minutes released on Wednesday, some policymakers saw clouds gathering, pointing to last month's brief inversion of the so-called yield curve - which measures the spread between short-term and longer-term Treasury bond rates - saying it "could portend economic weakening."

They also cited "disappointing" news on global growth and the fact that the US economy had gotten less of a boost from fiscal stimulus than they had previously anticipated.

While noting that inflation remained tame, meeting participants pointed to the high level of indebtedness among US corporations as an economic hazard.

The central bank's rate-setting Federal Open Market Committee is due to hold its next two-day meeting on April 30 and May 1.

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