Fed set to leave interest rates unchanged

Published May 2, 2017

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Washington - The US Federal Reserve is

expected to hold interest rates steady at its meeting this week

as it pauses to parse more economic data but may hint it is on

track for an increase in June.

The central bank is scheduled to release its policy decision

at 2 p.m. EDT (1800 GMT) on Wednesday at the conclusion of its

two-day meeting. Fed Chair Janet Yellen is not due to hold a

press conference.

Most policymakers have already made plain that in contrast

to previous years, the Fed feels more confident in its forecast

of two more rate increases this year.

"The bar to disrupting the Fed's plans is higher now than it

was in previous years," said Michael Gapen, chief economist at

Barclays in New York in a note to clients.

The Fed is in its first tightening cycle in more than a

decade. A quarter percentage point increase last December was

followed two meetings later by another hike in March.

Read also:  Fed will be strict in meeting targets

Economists polled by Reuters see little chance of a move 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 rate-setting committee also is still waiting to see to

what extent Trump administration policies on tax, spending and

regulation will be able to get through Congress. A stimulus

package could speed up the pace of hikes.

Downplay

Since the last meeting economic data has been mixed. The

economy grew at a sluggish 0.7 percent annual pace in the first

quarter as consumer spending almost stalled.

However, a surge in business investment and the fastest wage

growth in a decade suggest activity will regain momentum as the

year progresses.

Jobs growth also slowed sharply in March but the

unemployment rate dropped to a near 10-year low of 4.5 percent.

Economists have largely attributed the weak first-quarter

reading to perennial issues with the calculation of growth

during the January-March period and the pullback in hiring in

March to weather effects.

"There won't be a lot of changes to the policy statement,"

said Sam Bullard, senior economist at Wells Fargo Securities. "I

think they will downplay the soft first-quarter print and focus

a little bit more on the labor market."

The Fed will have two more employment growth reports to hand

before its next meeting.

Policymakers are also gearing up to announce sometime this

year when and how the Fed will begin shrinking its $4.5 trillion

balance sheet, according to minutes from the March meeting.

An announcement this week on a concrete timeline is not

expected but there could be tweaks to language in the statement

to show the matter is an increasing priority for the Fed. 

REUTERS

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