WASHINGTON — The Federal Reserve is waiting for more information about the Trump administration’s economic plans, just like everyone else.
After its first policy making meeting of the year, the Fed said on Wednesday that its economic outlook remained essentially unchanged since its previous meeting in December. The nation’s slow-and-steady economic expansion has continued, with little sign in the latest data that it is flagging or accelerating.
And as expected, the Federal Open Market Committee, which makes monetary policy, left the Fed’s benchmark interest rate unchanged.
The question is what comes next.
Fed officials said in the weeks before the meeting Wednesday that their uncertainty about the outlook had increased. President Trump has proposed significant shifts in economic policy — including changes in taxation, regulation and trade — that could affect growth.
“The statement is written such that the F.O.M.C. will be able to adjust monetary policy as needed in response to the fiscal and trade policies of the administration,” said Michael Gapen, chief United States economist at Barclays.
At its December meeting, the Fed raised its benchmark interest rate for just the second time since the financial crisis. After the increase of a quarter point, the rate now ranges from 0.5 percent to 0.75 percent, still very low by historical standards. Low rates encourage borrowing and risk-taking, contributing to faster economic growth.
By raising rates, the Fed is gradually reducing the force of that stimulus.
Fed officials predicted in December that they would raise the benchmark rate three times this year. But they have cautioned that changes in fiscal policy could alter those plans. If Mr. Trump and congressional Republicans seek to increase growth, for example by cutting taxes or spending a lot on infrastructure and the military, the Fed could raise rates more quickly.
If Mr. Trump’s policies weigh on growth, the Fed could move more slowly.
The only hint of those pressures in the Fed’s latest statement was a mention of increased public optimism about the outlook for the nation’s economy.
“Measures of consumer and business sentiment have improved of late,” it said.
Fed officials are watching fiscal policy makers closely because the Fed has concluded that the American economy is growing at something close to the maximum sustainable pace, meaning that, in the Fed’s view, faster growth would probably lead to higher inflation.
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Changes in fiscal policy are most likely to have a gradual impact, however, so the tension between the Fed and fiscal policy makers may play out mostly in coming years.
“The committee is probably still in a wait-and-see mode as far as fiscal policy is concerned,” said Kevin Logan, chief United States economist at HSBC.
The Fed’s assessment of economic conditions remained upbeat. The latest data showed “the labor market has continued to strengthen and that economic activity has continued to expand at a moderate pace,” the statement said. “Job gains remained solid and the unemployment rate stayed near its recent low.”
Fed officials spoke in similarly optimistic tones in the weeks before the meeting.
“All in all, things are looking good,” Patrick T. Harker, president of the Federal Reserve Bank of Philadelphia, said in mid-January. “We’re starting 2017 off on a good foot.”
But seven years of tepid growth have not restored the economy to full health.
The unemployment rate stood at 4.7 percent in December, a level most Fed officials regard as nearly normal. Other labor market measures, however, remain weak. Wage growth is tepid, and the employment to population ratio for people 25 to 54 was 78.2 percent in December. The Fed’s preferred measure of price inflation, the Bureau of Economic Analysis’ index of personal consumption expenditures, rose by 1.6 percent in 2016, the strongest performance in more than two years. But inflation remains below the Fed’s goal of a 2 percent annual pace — a goal the Fed has not achieved since 2011.
The vote to leave rates unchanged was unanimous, the Fed said. And the tempered language of the statement led investors to mark down the modest chance of a rate increase at the Fed’s next meeting, in March, from about 20 percent before the February statement to about 18 percent afterward, CME Group said.
Janet L. Yellen, chairwoman of the Fed, will have a chance to elaborate on the central bank’s economic outlook and policy plans when she delivers a semiannual report on monetary policy to Senate and House committees on Feb. 14 and 15.
In the meantime, the Fed is the rare corner of official Washington where nothing is happening. Contrasting a lively week at the White House and on Capitol Hill with the Fed’s announcement, Michael Feroli, the chief United States economist at JPMorgan Chase, declared the Fed’s headquarters “the most boring spot in Washington.”
WASHINGTON — The Federal Reserve is waiting for more information about the Trump administration’s economic plans, just like everyone else.
After its first policy making meeting of the year, the Fed said on Wednesday that its economic outlook remained essentially unchanged since its previous meeting in December. The nation’s slow-and-steady economic expansion has continued, with little sign in the latest data that it is flagging or accelerating.
And as expected, the Federal Open Market Committee, which makes monetary policy, left the Fed’s benchmark interest rate unchanged.
The question is what comes next.
Fed officials said in the weeks before the meeting Wednesday that their uncertainty about the outlook had increased. President Trump has proposed significant shifts in economic policy — including changes in taxation, regulation and trade — that could affect growth.
“The statement is written such that the F.O.M.C. will be able to adjust monetary policy as needed in response to the fiscal and trade policies of the administration,” said Michael Gapen, chief United States economist at Barclays.
At its December meeting, the Fed raised its benchmark interest rate for just the second time since the financial crisis. After the increase of a quarter point, the rate now ranges from 0.5 percent to 0.75 percent, still very low by historical standards. Low rates encourage borrowing and risk-taking, contributing to faster economic growth.
By raising rates, the Fed is gradually reducing the force of that stimulus.
Fed officials predicted in December that they would raise the benchmark rate three times this year. But they have cautioned that changes in fiscal policy could alter those plans. If Mr. Trump and congressional Republicans seek to increase growth, for example by cutting taxes or spending a lot on infrastructure and the military, the Fed could raise rates more quickly.
If Mr. Trump’s policies weigh on growth, the Fed could move more slowly.
The only hint of those pressures in the Fed’s latest statement was a mention of increased public optimism about the outlook for the nation’s economy.
“Measures of consumer and business sentiment have improved of late,” it said.
Fed officials are watching fiscal policy makers closely because the Fed has concluded that the American economy is growing at something close to the maximum sustainable pace, meaning that, in the Fed’s view, faster growth would probably lead to higher inflation.
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An error has occurred. Please try again later.
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View all New York Times newsletters.
Changes in fiscal policy are most likely to have a gradual impact, however, so the tension between the Fed and fiscal policy makers may play out mostly in coming years.
“The committee is probably still in a wait-and-see mode as far as fiscal policy is concerned,” said Kevin Logan, chief United States economist at HSBC.
The Fed’s assessment of economic conditions remained upbeat. The latest data showed “the labor market has continued to strengthen and that economic activity has continued to expand at a moderate pace,” the statement said. “Job gains remained solid and the unemployment rate stayed near its recent low.”
Fed officials spoke in similarly optimistic tones in the weeks before the meeting.
“All in all, things are looking good,” Patrick T. Harker, president of the Federal Reserve Bank of Philadelphia, said in mid-January. “We’re starting 2017 off on a good foot.”
But seven years of tepid growth have not restored the economy to full health.
The unemployment rate stood at 4.7 percent in December, a level most Fed officials regard as nearly normal. Other labor market measures, however, remain weak. Wage growth is tepid, and the employment to population ratio for people 25 to 54 was 78.2 percent in December. The Fed’s preferred measure of price inflation, the Bureau of Economic Analysis’ index of personal consumption expenditures, rose by 1.6 percent in 2016, the strongest performance in more than two years. But inflation remains below the Fed’s goal of a 2 percent annual pace — a goal the Fed has not achieved since 2011.
The vote to leave rates unchanged was unanimous, the Fed said. And the tempered language of the statement led investors to mark down the modest chance of a rate increase at the Fed’s next meeting, in March, from about 20 percent before the February statement to about 18 percent afterward, CME Group said.
Janet L. Yellen, chairwoman of the Fed, will have a chance to elaborate on the central bank’s economic outlook and policy plans when she delivers a semiannual report on monetary policy to Senate and House committees on Feb. 14 and 15.
In the meantime, the Fed is the rare corner of official Washington where nothing is happening. Contrasting a lively week at the White House and on Capitol Hill with the Fed’s announcement, Michael Feroli, the chief United States economist at JPMorgan Chase, declared the Fed’s headquarters “the most boring spot in Washington.”
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