The Federal Reserve raised its federal funds rate for the fourth time in 2018, though it shifted down its view of rate hikes in 2019 amid a more uncertain economic outlook.
Fed Chairman Jerome Powell held a news conference following the Fed meeting, where he said officials' view of the economy next year has moderated but that they still expect the U.S. economy to perform well. The median projection from the Federal Open Market Committee shows officials are now penciling in two rate increases in 2019, down from their September projection of three hikes.
Powell emphasized those are just forecasts and policy is "not on a preset course."
He also said the Fed's effort to gradually trim its $4.1 trillion balance sheet is proceeding smoothly and he sees no reason to take those cuts off auto-pilot.
U.S. markets sank following the Fed meeting. The S&P 500 closed down 1.54% for the day, with those losses coming primarily in the final two hours of trading.
Other key takeaways from Powell's news conference included comments on inflation, President Donald Trump's criticism of the Fed and the possibility of using the countercyclical capital buffer for banks.
On the economic outlook: Powell said "some crosscurrents have emerged" since the Fed met in September, but most Fed officials "expect the economy to continue to perform well in the coming year."
On the 2019 federal funds rate projections: Although the median Fed projection shows officials backing two rate hikes in 2019, Powell said those are just forecasts. Policy is "not on a preset course and will change if the incoming data materially change the outlook," he said.
On the neutral rate and data dependency: The Fed has "reached the bottom end of the range" of the FOMC's estimates of the neutral interest rate. "From this point forward, we're going to be letting the data speak to us and inform the outlook," he said.
On inflation: Price growth "has come in just a touch below where we expect it" despite a low unemployment rate, Powell said. He also said he thinks subdued inflation figures give "the committee the ability to be patient in moving forward" with rate hikes.
On balance sheet run-offs: The Fed chief said the central bank is not currently considering taking monthly reductions of its $4.1 trillion balance sheet off auto-pilot. "I think that has been a good decision," he said. "I think that the runoff of the balance sheet has been smooth and has served its purpose, and I don't see us changing that."
On Trump criticism: Political considerations "play no role whatsoever" in FOMC discussions and the Fed will always be focused on its mission from Congress, Powell stated. "Nothing will deter us from doing what we think is the right thing to do," he said.
On potentially activating the countercyclical capital buffer: Powell said the countercyclical capital buffer is a "tool I'm absolutely willing to use." The Fed is due to decide in January 2019 whether to deploy the countercyclical capital buffer and therefore temporarily raise capital levels at big banks. Powell said he still sees financial vulnerabilities as moderate but "would want to leave my mind open" until he discusses the issue with the Fed board.
On Brexit: "Our financial institutions have had a long time now to get ready," he said. "We think they are fully prepared for the full range of outcomes that may come out of that."