**MNI POLICY: FOMC Signals Pause in 2019; End Runoffs Sept>

--No Changes to "Patient" Stance, Policy Guidance

--Economic Activity, Household Spending "Slowed" 

--$20b Maturing MBS to be Reinvested in Tsys Across Maturities from Oct

By Jean Yung

     WASHINGTON (MNI) - The following are the key points from the 

FOMC statement released Wednesday:

     --A majority (11 out of 17) of FOMC officials see rates on hold in 

the 2.25% to 2.5% range for the year. The median forecast for 2020 is 

one hike followed by another pause in 2021, however a plurality (7 out 

of 17) of officials expect to remain on pause through next year. The 

longer run fed funds rate stayed at 2.8%. 

     --Asset runoffs will conclude by the end of September, after which 

the overall balance sheet size will be held steady as growth in currency 

and nonreserve liabilities continue to eat into reserves. To "ensure a 

smooth transition," the monthly Treasuries runoffs cap will be halved to 

$15 billion beginning in May. $20 billion worth of MBS will continue to 

roll off every month in an effort to move to an all-Treasuries balance 

sheet. 

     --After September, the first $20 billion of MBS principal payments 

received will be reinvested in Treasuries across a range of maturities 

"to roughly match the maturity composition of Treasury securities 

outstanding." The FOMC added however that it would revisit the plan 

later. 

     --The statement downgraded the economic outlook but made no changes 

to its policy guidance outside of the first paragraph. The FOMC repeated 

it "will be patient" in light of "muted inflation" and "global economic 

and financial developments." GDP is expected to grow 2.1% this year, 

two-tenths lower than expected in December.

     - The FOMC's range of forecasts for core inflation weakened 

slightly over all years, but the medians stayed at 2.0%. Headline 

inflation is expected to be slightly weaker in 2019, at 1.8% before 

rising to 2.0% in 2020 and 2021. 

--MNI Washington Bureau, Tel: +1 202-371-2121; email: dcoffice@marketnews.com

     ** MNI Washington Bureau: 202-371-2121 ** 

[TOPICS: MT$$$$,MMUFE$,MGU$$$,M$U$$$,MAUDR$]