Washington - The US Federal Reserve is
expected to keep interest rates unchanged on Wednesday in its
first policy decision since President Donald Trump took office,
as the central bank awaits greater clarity on his economic
policies.
Trump has promised a large infrastructure spending program,
tax cuts, a rollback of regulations and a renegotiation of trade
deals but has offered few details or a timeline for their
rollout since his victory in the November 8 election.
The central bank's latest policy decision is scheduled to be
released at 2 p.m. EST (1900 GMT) on Wednesday at the conclusion
of a two-day meeting. Fed Chair Janet Yellen is not due to hold
a press conference.
The policy decision will come a week after Yellen
underscored that the US economy is near full employment and
warned of a "nasty surprise" on inflation if the Fed is too slow
with its rate hikes.
Economists polled by Reuters have all but ruled out a rate
increase at this week's meeting. Investors next see
an interest rate rise in June, according to Fed futures data
compiled by the CME Group.
The Fed raised its benchmark interest rate at its last
policy meeting in December, the second such move in a decade, to
a target range between 0.50 percent and 0.75 percent. It
forecast a further three rate increases this year.
Wait-and-see
Despite encouraging US economic data, Fed policymakers are
currently hampered in assessing how quickly inflation might rise
until they have more information on Trump's economic plans.
"At the moment there's incredible uncertainty surrounding
fiscal policy and the potential for stimulus and the composition
of that," said Paul Ashworth, an economist at Capital Economics.
"The Fed can't react until it knows what to react to."
With the US economy already bumping up against full
employment, Trump's promises on fiscal stimulus and tax reform
could quickly spur higher inflation as would imposing tariffs on
Mexican imports.
That may cause Fed policymakers to raise rates faster.
Other policies, such as an immigration crackdown, go against
what the Fed argues the US economy needs to grow over the long
term.
US stocks fell on Monday after Trump curtailed travel and
immigration to the United States from seven predominantly Muslim
countries.
The S&P 500 index is still up roughly 6 percent since
Trump's victory and the robustness of the domestic economy makes
the United States increasingly divergent from Japan, the euro
zone and Britain, none of which are expected to raise rates
anytime soon.
The Fed will likely only make minor tweaks in its policy
statement on Wednesday to reflect a string of positive recent
economic reports.
"Changes to the ... statement should be mostly upbeat,"
Roberto Perli, an economist at Cornerstone Macro, said in a
note to clients.
The US unemployment rate is 4.7 percent and business
investment has improved, despite a slowdown in fourth-quarter
economic growth caused mostly by a widening trade deficit.
Consumer spending, which accounts for more than two-thirds of
the nation's economic activity, rose solidly in December,
according to Commerce Department data released on Monday.
In the same report, the Fed's closely-watched inflation
gauge also edged up to 1.7 percent.