The Federal Reserve is expected to leave interest rates unchanged on Wednesday and with the U.S. economy moving towards negative territory, chances of a March rate hike are slowly waning.
Analysts predict that the central bank will keep its key overnight lending rate in a range of 0.25 percent to 0.50 percent when it issues its policy statement following this week’s two-day meeting. The decision is due at 2 p.m. EST (1900 GMT).
The central bank is expected to say in its policy statement that it is following global economic and financial events closely in the same manner it did during last summer’s market instability. And according to Goldman Sachs economist David Mericle, “This would constitute a moderate acknowledgement of risks that avoids shutting the door to a March hike.”
Investors Concerned
The month-long plunge in U.S. and world equities since the start of the year has investors worried that a sudden global slowdown could drag down the U.S. economy. And although the Fed would want to appear unconcerned about the market volatility that could prove temporary, many investors are now betting that the central bank will raise the interest rate only one quarter-point in 2016 instead of the four signaled in Fed policymakers’ economic forecasts last month.
However, the current prices for Fed funds futures seem to indicate that some investors see about a 30 percent chance of a rate increase in March, a move that would make the likelihood of four hikes over the year more plausible.
Economists are now forecasting that the U.S. economic growth will accelerate this year to 2.4 percent from 2.1 percent last year.
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