WASHINGTON — Federal Reserve officials were worried about slowing economic growth abroad and the fading effects of President Donald Trump’s tax cuts when they decided in March to pause interest rate increases and cut economic growth forecasts for 2019, according to minutes from the meeting released Wednesday.
The minutes showed that members of the Federal Open Market Committee judged consumer spending and business investment to be slowing in the first quarter of the year, and that they “generally expected the growth rate of real GDP this year to step down from the pace seen over 2018,” which was 3 percent.
Some Fed officials raised concerns that complications with Britain’s withdrawal from the European Union or the Trump administration’s trade talks with China could further hurt growth this year, and “a few” worried that high levels of debt corporations have taken on during the expansion could exacerbate a downturn in the United States. Officials showed little concern over the possibility that inflation could surge this year.
“A number of participants judged that economic growth in the remaining quarters of 2019 and in the subsequent couple of years would likely be a little lower, on balance, than they had previously forecast,” the minutes said. “Reasons cited for these downward revisions included disappointing news on global growth and less of a boost from fiscal policy than had previously been anticipated.”
After raising interest rates four times in 2018, Fed officials left them unchanged in March, citing subdued inflation and increased challenges to global growth. They surprised financial markets by releasing projections showing that the typical Fed official does not expect any changes to interest rates this year, down from the two increases that the Fed said it expected in December. And they announced a faster-than-expected end to the winnowing of the Fed’s giant portfolio of bonds, which it accumulated in an effort to stoke economic growth after the financial crisis.
The Fed also reduced its 2019 growth forecast to 2.1 percent — a full percentage point less than what the Trump administration predicts for the year.
Those revisions, along with muted inflation pressures, prompted most Fed officials to concur that interest rates would likely stay unchanged in 2019. “A majority of participants expected that the evolution of the economic outlook and risks to the outlook would likely warrant leaving the target range unchanged for the remainder of the year,” the minutes said.
In a news conference after the meeting, the Fed chairman, Jerome Powell, called the domestic economy “strong” but said the Fed would be patient — and attentive to economic data — before deciding its next move on interest rates.
“Data arriving since September suggest that growth is slowing somewhat more than expected,” he said.
Taking questions from reporters, Powell did not rule out the Fed’s next move being a rate cut, as many investors now expect. “The data that we’re seeing are not currently sending a signal which suggests moving in either direction for me,” he said, “which is really why we’re being patient.”
The minutes show committee members shared that view: “A majority of participants expected that the evolution of the economic outlook and risks to the outlook would likely warrant leaving the target range unchanged for the remainder of the year.”
Powell is under intense pressure from Trump to keep interest rates low and take new measures to stimulate growth. On Friday, Trump called for the Fed to cut rates and to resume its bond-buying program to goose the economy. He also has said he plans to nominate Herman Cain, a former businessman and Republican presidential candidate, to the Fed, along with one of his economic advisers, Stephen Moore.
Republican senators expressed concerns this week about Cain, whose White House run was derailed by multiple allegations of sexual harassment from several women. Asked Wednesday if Cain’s nomination was safe, Trump offered only a limited vote of confidence.
“I like Herman Cain, and Herman will make that determination,” he said. “He’s just somebody I like a lot. As to how he’s doing in the process, that I don’t know. Herman’s a great guy, and I hope he does well.”