US Federal Reserve expected to keep interest rates unchanged during first policy meeting of 2020

The US Federal Reserve is expected to keep interest rates unchanged during its first policy meeting of 2020 on Wednesday. Since the Fed cut rates in October, its third and final reduction in borrowing costs in 2019, policymakers have agreed to keep their target policy rate in the current range of 1.5% and 1.75% until there is some significant change in the economic outlook. Economic data since the Fed’s last policy meeting in December has done little to shift expectations for continued economic growth this year of around 2% and steady, low unemployment. READ: US Federal Reserve holds rates steady, no appetite to hike for now However, risks have emerged recently, such as China’s slowing economic growth and the coronavirus outbreak, which has roiled the markets and caused US Treasury bond yields to fall. While investors have increased bets the Fed would cut rates again at some point in 2020, analysts still are nearly unanimous that any such decision is months down the road. Out of 108 economists polled by Reuters recently, 95 said they expected the Fed to leave rates on hold at this week’s meeting, and JP Morgan analyst Michael Feroli said it would likely be “one of the least eventful meetings in recent years.” Fed's balance sheet If the Fed keeps rates where they are, the focus could shift to the central bank’s balance sheet. Over the last four months, the Fed has re-expanded its asset holdings by almost $400 billion as it eats up about $60 billion a month in Treasury bills. Fed chairman Jerome Powell has said those asset purchases would continue at least through the second quarter of this year. The central bank is due to release its policy statement at 2 pm EST. Powell is scheduled to hold a news conference half an hour later. Contact the author: patrick@proactiveinvestors.com Follow him on Twitter @PatrickMGraham