Fed poised to signal pause in US interest rate hikes

Washington, Dec 19: The US Federal Reserve is expected to raise the benchmark lending rate on Wednesday but to accompany that with a strong sign it will hold off on future increases.

But the outcome of the two-day monetary policy meeting is perhaps the most uncertain of any in the past decade. A remarkably low 72 percent of market participants expect an increase in the federal funds rate which is used to set the cost of borrowing for everything from homes to cars.

The move seems certain to anger President Donald Trump who has attacked the Fed repeatedly on Twitter for even considering going ahead with the fourth hike this year in the federal funds rate.

But with increasing signs the US economy may have peaked causing stock markets to crumble in recent weeks, what analysts and investors are looking for is confirmation the central bank will stand on the sidelines for a time.

While economic conditions have not "changed enough yet to cause a dramatic slowing in growth" of the US economy, "Fed officials are widely expected to deliver a 'dovish hike,'" Jim O'Sullivan of High-Frequency Economics said.

That entails raising the benchmark interest rate to 2.5 percent from 2.25 percent but removing language from the statement that had for months promised "further gradual increases."

The Fed also will release the quarterly forecasts from the policy committee members, which seems likely to show they expect to raise rates only once or twice next year rather than the three hikes previously expected.

Fed Chairman Jerome Powell will hold a press conference after the meeting, which will give him the opportunity to explain the message to financial markets.

(AFP/APP)