For the fourth consecutive meeting, the Federal Open Market Committee left the federal funds rate unchanged Wednesday, but also signaled a rate cut could be in the not-too-distant future.
The committee held the target range for the federal funds rate at 2.25% to 2.5%, but amended its future outlook. In March, FOMC members reduced the number of projected rate hikes in 2019 to zero from two and projected, on average, that the federal funds rate will stay at 2.4% by the end of 2019 and rise to 2.6% by the end of 2020. Now, they project, on average, the funds rate will dip to 2.1% by the end of 2020.
Nine members voted to keep the rate unchanged at this month's meeting while St. Louis Fed President James Bullard voted to cut the funds rate by a quarter point.
"We want to react to developments and trends that are sustained ... and not just react to data points and changes in sentiment, which can be volatile," said Federal Reserve Chairman Jerome Powell at a news conference following the two-day meeting. "At the same time, we're quite mindful of the risks to the outlook and are prepared to move and use our tools as needed to sustain the expansion."
The committee said in a statement that it continues to view sustained expansion of economic activity, strong labor market conditions and inflation near its 2% objective as the most likely outcome, but "uncertainties about this outlook have increased."
David Norris, head of U.S. credit at TwentyFour Asset Management, said the Fed's economic uncertainties likely stem from trade tensions with China. He said the Fed's action Wednesday raises the probability of a rate cut at its next meeting July 30-31.
In determining the timing and size of future rate adjustments, the committee said it will assess realized and expected economic conditions relative to its maximum employment objective and its 2% inflation objective.
Ron Temple, co-head of multiasset and head of U.S. equity at Lazard Asset Management, said the Fed made the right call by keeping rates unchanged. "It avoided an unnecessary easing and yet gave markets the signal that they are ready to act, if necessary," he said in a statement. "At this point, what the market needs is not Fed easing. Rate cuts cannot paper over the single biggest global economic risk, which is the uncertainty arising from unpredictable U.S. trade policy."
President Donald Trump, who has criticized the Fed and Mr. Powell for raising rates during his time in office, said, "Let's wait and see what he does," when asked by a reporter Tuesday if he wants to demote Mr. Powell. "I want to be given a level playing field, and so far I haven't been," Mr. Trump said.
When asked about his job security Wednesday, Mr. Powell said he intends to serve his full term.