US growth easing as global risks heightens, says Fed

Minutes from the Fed’s most recent policy meeting revealed apprehension from the central bank on its next move, due to an increased uncertainty on the outlook of the global economy.

US Federal Reserve Source: Bloomberg

Economic growth in the United States (US) is likely to ‘step down’ this year compared to last year’s quicker pace as global risks - including trade frictions - rise, the US Federal Reserve said in a report on Wednesday.

Minutes from the Fed’s most recent policy meeting revealed apprehension from the central bank on its next move, due to an increased uncertainty on the outlook of the global economy.

The Fed raised the benchmark lending rate four times last year, but it kept the key interest rates on hold last month, sending additional signals that it would not raise rates anytime soon.

Experts think that it is likely for the Fed to hike interest rates twice this year, instead of the three or four hikes previously projected.

According to Moody’s Investors Service, major central banks are expected to slow in their pace of tightening this year due to the gloomy global outlook, a report late last month showed.

Slower global growth, deteriorated consumer and business sentiment

In the Fed minutes, it noted that the global economy ‘continued to record slower growth, and consumer and business sentiment had deteriorated’. Meanwhile, Britain’s divorce from the European Union, trade tensions between nations such as the US and China, and the recent US government shutdown also contributed ‘to uncertainty about the economic outlook’.

The minutes said the central bank would adopt a wait-and-see approach, to ‘allow time for a clearer picture of the international trade policy situation and the state of the global economy to emerge’.

The Fed added that it was not yet clear on what adjustments to the key policy interest rate ‘may be appropriate later this year’.

Inflation in the US has been muted so far. In January, the US core consumer price index (CPI), which excludes food and energy, rose 0.2% from the previous month and 2.2% from a year ago. The broader CPI indicator was unchanged from December, below analysts’ forecasts.

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