The Federal Reserve kept its key interest rate unchanged at a low level Wednesday amid an economy that looks solid but faces potential global threats, including from China’s viral outbreak. The Fed sketched a mostly bright picture of the US economy in the statement it released after its latest policy meeting, the AP reports. Yet it also cautioned that it would “monitor” the world economy, which could be slowed by China’s coronavirus—a risk that Chairman Jerome Powell mentioned at the start of a news conference. Stock and bond markets have gyrated in the past week over fears about the virus. The central bank said it would hold short-term rates in a range of 1.5% to 1.75%, far below levels that have been typical during previous expansions. Powell and other Fed officials have indicated that they see that range as low enough to support faster growth and hiring.
Stock prices rose modestly after the Fed issued its statement at 2pm Eastern time. Bond yields were mostly unchanged. The Fed’s statement, which the 10 policymakers approved unanimously, was nearly identical to the one it issued after its December meeting, though it described consumer spending as rising at only a “moderate” rather than at a “strong” pace. That change likely reflects relatively modest spending by Americans over the winter holidays. Last year, the Fed cut its benchmark interest rate three times after having raised it four times in 2018. Investors seem increasingly to believe that the Fed will feel compelled to cut rates again later this year. The chances of a cut by September’s Fed meeting have risen to about 56%, according to the Chicago Mercantile Exchange’s FedWatch tool, up from 37% just a month ago.
(Read more Federal Reserve