Fed Waiting to See Economic Results From Flurry of Trump Actions

• Fed Waiting to See Economic Results From Flurry of Trump Actions

Like everyone trying to figure out where the U.S. economy is heading, the Federal Reserve is waiting to see what the whirlwind of executive orders and remarks from President Donald Trump mean for growth as they weigh the timing of the next interest-rate hike.

U.S. central bankers left their benchmark lending rate unchanged on Wednesday and used their statement to acknowledge that sentiment has gained, and that inflation will rise to their 2 percent target even with “gradual” adjustments in interest rates. They weren’t impressed by the fourth-quarter bounce-back in business investment and continued to term it “soft.”

“The Federal Reserve acknowledged the boost in sentiment on the part of consumers and businesses, but were not certain enough about the outlook to signal a rate hike was a strong possibility in the near future,” Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York, said in an e-mail.

Investors see a roughly one-in-three chance the Fed will raise rates by a quarter percentage point at their next meeting, on March 14-15, with the odds of an increase rising to around 70 percent by their June meeting, according to pricing in federal funds futures markets.

In his first days in office, Trump has rolled out executive orders on immigration and regulatory reduction. He’s announced the U.S. will pull out of the Trans-Pacific Partnership, and signed a memorandum to revive the Keystone XL pipeline. Infrastructure spending and tax reform are also on his agenda.

‘What to Watch’

Just what it all means for growth going forward is still hard to see.

Cheryl Bachelder, the chief executive officer of Popeyes Louisiana Kitchen Inc., told analysts last month that there is “genuine optimism” about the future stemming from the election that’s “yet to become real.”

“That’s what to watch in 2017,” she added. “It’s the things people are optimistic” about that could “turn into truth.”