At its meeting today, the Federal Open Market Committee (FOMC) unanimously voted to maintain the target range for the federal funds rate at 2.25 to 2.5 percent. The committee signaled no additional rate increases this year, down from two in its previous projections.
The Committee’s statement noted that the labor market has remained strong, but economic growth has slowed from its solid rate in the fourth quarter. The statement went on to say, “Recent indicators point to slower growth of household spending and business fixed investment in the first quarter.” Due to global economic and financial developments and subdued inflation, the Committee stressed that it “will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate.”
The Committee’s revised economic projections lowered the forecast for 2019 GDP growth from 2.3 to 2.1 percent and the forecast for 2020 GDP growth from 2.0 to 1.9 percent. Additionally, they raised the projected unemployment rate at the end of 2019 from 3.5 to 3.7 percent.
The FOMC announced changes to the balance sheet normalization program. The Committee plans to slow the reduction of its holdings of Treasury securities by reducing the cap on monthly redemptions from its current level of $30 billion to $15 billion starting in May. Additionally, the balance sheet runoff is now expected to conclude at the end of September. Any principal payments from mortgage-backed securities will be reinvested in Treasury securities up to a cap of $20 billion per month. The Committee intends to move towards a balance sheet consisted primarily of Treasury securities.