Spotlight: U.S. Fed expected to hold rates steady in final meeting of 2019
"Under current economic conditions, the Fed has ample room to remain accommodative, tolerate any upside deviation to inflation and still retain some power to respond to negative developments in trade tensions," Brusuelas wrote in a note on Monday.
The Fed has lowered interest rates three times since July, amid growing risks and uncertainties stemming from trade tensions, weakness in global growth and muted inflation pressures. These policy adjustments put the current target range of federal funds rate at 1.5 percent to 1.75 percent.
Panelists put the odds of a recession at 21 percent by the first half of 2020 and 43 percent by the end of next year, while the odds of a recession beginning by mid-2021 are 66 percent, according to the survey.
The U.S. economy expanded at an annual rate of 2.1 percent in the third quarter this year, slightly up from the 2 percent growth rate in the second quarter but a sharp deceleration from the 3.1 percent in the first quarter, according to the U.S. Commerce Department.
Joseph Brusuelas, chief economist with RSM US LLP, an audit, tax, and consulting firm, also believed the Fed would leave rates unchanged this week.
A panel of 53 professional forecasters anticipate that U.S. economic growth will slow to 1.8 percent in 2020, according to a new survey from the National Association for Business Economics (NABE) released Monday.
"The Fed may be optimistic about the economy, but (Fed Chairman Jerome) Powell and his colleagues don't want to undermine their efforts this year with a premature pivot back to rate hikes. This will keep them standing pat," he argued.
WASHINGTON, Dec. 10 (Xinhua) -- In its final policy meeting of 2019 that begins on Tuesday, the U.S. Federal Reserve is expected to hold interest rates steady after cutting rates at each of the last three meetings, economists have said.
"In our estimation, this will essentially make the Fed a sideshow for the next few months as attention turns to policy risks around the trade conflict and the upcoming presidential election," he said.
"As for the prospect of reversing the rate cuts, the Fed isn't ready to go there, either. Not only do central bankers remain wary of potential downside risk, they also have yet to achieve sustained inflation at their 2 percent target rate," Duy said, calling the Fed meeting this week "dovish hold."
Trade policy continues to be the "most widely cited" dominant downside risk to the U.S. economy through 2020, with half of respondents in the latest survey citing it as the greatest downside risk.
The survey showed that no panelists forecast a U.S. economic recession in 2020, but the panel is split regarding when the next recession will begin.
"Policy makers aren't inclined to cut rates again barring a fresh downturn in activity; clearly, an upswing will take a rate cut off the table entirely," Tim Duy, professor at the University of Oregon and a long-time Fed watcher, wrote in an analysis on Tuesday. He noted that the U.S. economy is "apparently on firmer footing," citing November employment data.
However, a majority of 31 economists polled by Bloomberg recently expected that Fed officials won't allow the 2020 presidential election to sway their monetary policy decisions and will keep rates on hold for the next two years.
Robert Kaplan, president of the Federal Reserve Bank of Dallas, said in a recent interview with CNBC that he expected U.S. economic growth to "be weak" in the fourth quarter of the year as businesses cut inventories due to trade uncertainty.