Fed Halts Interest Rate Hikes In 2019

USD

The U.S. Federal Reserve on Wednesday abandoned projections for any interest rate hikes in 2019 amid signs of an economic slowdown.

The measures, announced following the end of a two-day policy meeting, mean the Fed’s gradual and sometimes fitful efforts to return monetary policy to a more normal footing will stop well short of what was foreseen in late 2015 when the central bank first moved rates from the near-zero level adopted in response to the 2007-2009 financial crisis and recession.

Having downgraded their U.S. growth, unemployment and inflation forecasts, policymakers said the Fed’s benchmark overnight interest rate, or fed funds rate, was likely to remain at the current level of between 2.25 percent and 2.50 percent at least through this year, a wholesale shift of their outlook.

The new rate view brings the Fed in line with investors who have argued the central bank would not raise rates this year. The outlook is now also in line with President Donald Trump’s criticism of Fed rate hikes as endangering the recovery.

GBP

Sterling fell on Wednesday after British Prime Minister Theresa May’s request to delay Brexit until June 30 faced resistance from parts of the European Union. With no consensus in Britain’s parliament over how to leave the EU, May has been forced to seek an extension from the EU beyond the scheduled departure date of March 29.The delay requested is shorter than some in the market had been expecting and the prime minister said a no-deal Brexit was still possible, keeping sterling traders on edge.

An extension, which will need approval from all EU member states which leaves the Brexit divorce uncertain; with options including leaving with May’s deal, a longer delay, a disruptive exit or even another referendum. France then threatened to reject May’s request unless she can guarantee to get her twice-rejected departure plans through parliament.

Earlier, official data showed British inflation ticked up last month but stayed close to January’s two-year low. As with most economic data releases, the numbers had little impact on a pound preoccupied with Brexit headlines.

Key Announcements

09.30 – GBP: Retail Sales MoM; Forecast at -0.4% against previous of 1.0%
12.00 – GBP: MPC Official Bank Rate Votes; Not expected to change
12.00 – GBP: Monetary Policy Summary
12.00 – GBP: Official Bank Rate; Not expected to change