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Fed Says No Rate Hikes In 2019; Trump Warns China Tariffs Could Stand For A 'Substantial Period Of Time'

Wayne Duggan

President Donald Trump told reporters Wednesday tariffs on Chinese goods could remain in place for an extended period of time. The bearish comments came on the same day the FOMC minutes revealed a cautious Fed.

Trade War Comments

Trump told reporters that, even if a trade deal with China is reached, tariffs will likely remain in place.

“We're not talking about removing [tariffs], we're talking about leaving them for a substantial period of time because we have to make sure that if we do the deal with China that China lives by the deal,” Trump said.

Trump’s latest comments come after a report Tuesday suggested China could be backing off of potential trade deal concessions, possibly in an attempt to apply pressure to Trump during the 2020 campaign season.

No 2019 Rate Hikes

In a move that was widely expected, the Federal Reserve opted not to raise interest rates on Wednesday and said there will likely be no additional rate hikes in 2019.

There was a bit of softening in some of the Fed’s economic forecasts for 2019. The Fed lowered its economic growth forecast from 2.3 percent to 2.1 percent. It also said 2019 inflation rates will average 1.8 percent, down from 1.9 percent and below its 2 percent target. Finally, the new estimated unemployment rate is 3.7 percent, up from 3.5 percent in December.

The FOMC’s lower expectations are clearly reflected by a major shift in its “dot plot” chart. In December, 11 of the 17 members predicted two rate hikes this year, with only two members forecasting no hike at all. On Wednesday, that balance reversed, with 11 members calling for no 2019 hikes and just 2 calling for multiple hikes.

"Recent indicators point to slower growth of household spending and business fixed investment in the first quarter ... overall inflation has declined,” the Fed said.

Markets React

Despite the initial sell-off on the trade war news, the SPDR S&P 500 ETF Trust (NYSE: SPY) bounced back on the dovish news from the Federal Reserve, rebounding to near Tuesday’s closing price following the Fed meeting.

Ten-year treasury yields dropped to 2.53 percent after the Federal Reserve announcement, their lowest level in over a year.

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