Fed Expected to Raise Rates Wednesday  12/19 06:30

   WASHINGTON (AP) -- The Federal Reserve is expected Wednesday to raise its 
benchmark rate for a fourth time this year despite President Donald Trump's 
repeated assertions that doing so would be a terrible idea.

   The president fired off two tweets this week objecting to a rate hike. In 
one of them, he called it "incredible" that the Fed would consider raising 
rates again when "the outside world is blowing up around us."

   In the lead-up to this week's meeting, Fed officials have signaled that 
they're set to raise rates Wednesday. Still, after Trump's stream of tweets, 
continued losses on Wall Street, persistent trade frictions and growing 
evidence of a global slowdown, some doubts have arisen among Fed watchers. The 
CME Group's index of investor expectations has put the likelihood of no rate 
increase Wednesday at 28 percent --- an unusually high level of doubt on the 
eve of an anticipated Fed announcement.

   After this week, prospects for the course of interest rates will become more 
uncertain. Investors hope to glean some clues from the Fed's latest policy 
statement, along with an updated economic outlook and a news conference by 
Chairman Jerome Powell. Many analysts think the Fed will signal that it's 
considering whether to slow or suspend its rate hikes in 2019 to avoid 
weakening the economy too much. And some predict that the rate increases, which 
began three years ago, will end altogether next year.

   In September, Fed officials collectively forecast that they would raise 
rates three times in 2019. This week, though, in the view of many analysts, the 
central bank could indicate that no more than two rate hikes are likely next 
year.

   Yet the central message coming out of Wednesday's meeting may be that the 
Fed plans to suit its rate policy to the latest economic data. In Fed parlance, 
it will be "data-dependent."

   The idea, some analysts say, is that the Fed may want to pause in its 
credit-tightening to assess how the economy fares in the coming months in light 
of the headwinds it faces. Contributing to this view was a speech Powell gave 
last month in which he suggested that rates appear to be just below the level 
the Fed calls "neutral," where they're believed to neither stimulate growth nor 
impede it. Powell's observation suggested that the Fed might be poised to soon 
slow or halt its rate hikes.

   For now, most U.S. economic barometers are still showing strength. The 
unemployment rate is 3.7 percent, a 49-year low. The economy is thought to have 
grown close to 3 percent this year, its best performance in more than a decade. 
Consumers, the main driver of the economy, are spending freely.

   In such an environment, the Fed would normally keep gradually raising rates 
to make sure the economy didn't overheat and ignite inflation. But this time, 
risks to the economy appear to be rising. From China to Europe, major economies 
are weakening. Trump's trade conflict with Beijing could, over time, undermine 
the world's two largest economies.

   There are also fears that the brisk pace of U.S. growth this year reflected 
something of a sugar high, with the economy artificially pumped up by tax cuts 
and a boost in government spending. The benefit of that stimulus will likely 
fade in 2019, slowing growth to a more modest pace.

   Economists believe that whatever the Fed does, it won't be influenced by the 
attacks Trump has made on the central bank and on Powell personally since the 
stock market began tumbling this fall. Powell, who was Trump's hand-picked 
choice to be chairman, has stressed that the Fed will pursue its mandate of 
managing rates to maximize employment and stabilize prices, regardless of any 
outside criticism.

   The White House gave no indication that Trump plans to soften his views on 
the Fed.

   "The president is stating his opinion, which he is perfectly within his 
right to do," his press secretary, Sarah Huckabee Sanders, told reporters 
Tuesday.


(KA)