US Federal Open Market Committee (FOMC) has left the interest rates unchanged at 2.25-2.5 percent, which was widely expected and accounted for in the markets. But the surprise of a dovish comment on the outlook for the economy inspite of being patient before making further moves.
Fed is ready to adjust the balance sheet reduction program if the economic conditions warrant it. Fed Governor, Jerome Powell didn’t give out any final target (estimated at $3.5trillion) for the balance sheet as that is expected to be finalized in the coming meetings. He agreed there is likely to be an impact on the economy due to partial shutdown of the US Federal Government for 34 days.
With the shift towards an accommodative language while ensuring ample supply through balance sheet normalization, Fed is likely to hold on to interest rates for the year.