The market has completely flipped its expectations for the Fed

  • Previously, market watchers had been anticipating two interest rate increases in 2019.
  • But forecasts for growth have dimmed in major economies, including the US.
  • Wall Street now sees a Federal Reserve rate cut as more likely for its next move.

Market watchers have long been anticipating a steady increase in borrowing costs. But as outlooks for the economy dim, they see an increasing possibility that the Federal Reserve could actually lower interest rates in its next policy move.

Expectations for a rate hike this year have fallen below those for a cut. Bloomberg data shows a zero percent chance the Fed raises rates this year and a 27.7% probability of a 25-basis-point cut. In January, the central bank signaled it could be nearing the end of its most recent tightening cycle. 

That could become more apparent Wednesday afternoon, where the Federal Reserve is widely expected to hold interest rates steady. Focus will be on how much growth is expected to slow this year and signals on future moves. 

RELATED: Take a look at Jerome Powell throughout the years: 

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Jerome Powell through the years
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Jerome Powell through the years
FILE: Jerome Powell, governor of the U.S. Federal Reserve, stands for a photograph at the board's headquarters in Washington, D.C., U.S., on Thursday, April 13, 2017. With the White House scheduling an announcement for 3 p.m. in Washington on Thursday, U.S. President Donald Trump will announce Powell, 64, as his nominee to be Federal Reserve chairman, said several people familiar with the decision, replacing Chair Janet Yellen when her term expires in February. Our editors select the best archive images of Jerome Powell. Photographer: T.J. Kirkpatrick/Bloomberg via Getty Images
FILE: Jerome Powell, governor of the U.S. Federal Reserve, stands for a photograph at the board's headquarters in Washington, D.C., U.S., on Thursday, April 13, 2017. With the White House scheduling an announcement for 3 p.m. in Washington on Thursday, U.S. President Donald Trump will announce Powell, 64, as his nominee to be Federal Reserve chairman, said several people familiar with the decision, replacing Chair Janet Yellen when her term expires in February. Our editors select the best archive images of Jerome Powell. Photographer: T.J. Kirkpatrick/Bloomberg via Getty Images
Jerome H. Powell, a governor on the board of the Federal Reserve System, prepares to testify to the Senate Banking Committee on Capitol Hill in Washington, U.S., June 22, 2017. REUTERS/Joshua Roberts
Federal Reserve Board Governor Jerome Powell discusses financial regulation in Washington, U.S., October 3, 2017. REUTERS/Joshua Roberts
Jerome H. Powell, a governor on the board of the Federal Reserve System, prepares to testify to the Senate Banking Committee on Capitol Hill in Washington, U.S., June 22, 2017. REUTERS/Joshua Roberts
Jerome H. Powell, a governor on the board of the Federal Reserve System, prepares to testify to the Senate Banking Committee on Capitol Hill in Washington, U.S., June 22, 2017. REUTERS/Joshua Roberts
Commodity Futures Trading Commission (CFTC) Chairman Christopher Giancarlo, Federal Reserve Board Governor Jerome Powell and moderator Reuters columnist Gina Chon discuss financial regulation in Washington, U.S., October 3, 2017. REUTERS/Joshua Roberts
Federal Reserve Governor Jerome Powell attends the Federal Reserve Bank of Kansas City's annual Jackson Hole Economic Policy Symposium in Jackson Hole, Wyoming August 28, 2015. REUTERS/Jonathan Crosby
Federal Reserve Governor Jerome Powell delivers remarks during a conference at the Brookings Institution in Washington August 3, 2015. REUTERS/Carlos Barria
Federal Reserve Governor Jerome Powell attends a conference at the Brookings Institution in Washington August 3, 2015. REUTERS/Carlos Barria
U.S. Federal Reserve Chair Janet Yellen (L) congratulates Fed Governor Jerome Powell at his swearing-in ceremony for a new term on the Fed's board, in Washington in this handout photo taken and released June 16, 2014. REUTERS/U.S. Federal Reserve/Handout via Reuters (UNITED STATES - Tags: POLITICS BUSINESS) ATTENTION EDITORS - FOR EDITORIAL USE ONLY. NOT FOR SALE FOR MARKETING OR ADVERTISING CAMPAIGNS. THIS PICTURE WAS PROVIDED BY A THIRD PARTY. REUTERS IS UNABLE TO INDEPENDENTLY VERIFY THE AUTHENTICITY, CONTENT, LOCATION OR DATE OF THIS IMAGE. THIS PICTURE IS DISTRIBUTED EXACTLY AS RECEIVED BY REUTERS, AS A SERVICE TO CLIENTS
Federal Reserve Board Governors Jeremy Stein (L) and Jerome Powell attend the swearing in of new Federal Reserve Board Chairwoman Janet Yellen at the Federal Reserve Board in Washington, February 3, 2014. REUTERS/Jim Bourg (UNITED STATES - Tags: BUSINESS POLITICS)
Federal Reserve Board of Governors member Jerome Powell listens during an open board meeting at the Federal Reserve in Washington December 14, 2012. REUTERS/Kevin Lamarque (UNITED STATES - Tags: POLITICS BUSINESS)
Federal Reserve Board of Governors member Jerome Powell listens during an open board meeting at the Federal Reserve in Washington December 14, 2012. REUTERS/Kevin Lamarque (UNITED STATES - Tags: POLITICS BUSINESS)
Elissa Leonard looks on as her husband Jerome Powell is sworn in as a member of the Federal Reserve's Board of Governors by Chairman Ben Bernanke in Washington in this Federal Reserve System handout photo dated May 25, 2012. The former investment banker and U.S. Treasury official is due to fill a term expiring Jan. 31, 2014. REUTERS/Federal Reserve System/Handout (UNITED STATES - Tags: BUSINESS POLITICS) FOR EDITORIAL USE ONLY. NOT FOR SALE FOR MARKETING OR ADVERTISING CAMPAIGNS. THIS IMAGE HAS BEEN SUPPLIED BY A THIRD PARTY. IT IS DISTRIBUTED, EXACTLY AS RECEIVED BY REUTERS, AS A SERVICE TO CLIENTS
Jerome Powell, governor of the U.S. Federal Reserve, left, shakes hands with Terry Lundgren, chairman of The Economic Club of New York and executive chairman of Macy's Inc., after speaking at an Economic Club of New York event in New York, U.S., on Thursday, June 1, 2017. Powell�is calling for gradual interest rate increases and a start to balance-sheet reductions later this year if the economy stays on track, though hes watching a recent slowdown in inflation. Photographer: Michael Nagle/Bloomberg via Getty Images
Jerome Powell, governor of the U.S. Federal Reserve, speaks during an Economic Club of New York event in New York, U.S., on Thursday, June 1, 2017. Powell�is calling for gradual interest rate increases and a start to balance-sheet reductions later this year if the economy stays on track, though hes watching a recent slowdown in inflation. Photographer: Michael Nagle/Bloomberg via Getty Images
Daniel Tarullo, left, and Jerome Powell, governors of the U.S. Federal Reserve, talk before the start of a meeting of the Board of Governors of the Federal Reserve in Washington, D.C., U.S., on Monday, Nov. 30, 2015. The Federal Reserve took the final step to ensure it can't repeat the extraordinary steps taken to rescue American International Group Inc. and Bear Stearns Cos. in 2008, adopting formal restrictions on its ability to help failing financial firms. Photographer: Andrew Harrer/Bloomberg via Getty Images
Jeremy Stein, nominee to be a member of the board of governors with the U.S. Federal Reserve, right, listens to fellow nominee Jerome Powell speak during a Senate Banking Committee hearing in Washington, D.C., U.S., on Tuesday, March 20, 2012. Federal Reserve Chairman Ben S. Bernanke stands to gain two lieutenants with expertise on financial markets if the Senate confirms President Barack Obama's nominees to the Board of Governors. Photographer: Andrew Harrer/Bloomberg via Getty Images
Jerome Powell, nominee to be a member of the board of governors with the U.S. Federal Reserve, left, speaks during a Senate Banking Committee hearing with fellow nominee Jeremy Stein in Washington, D.C., U.S., on Tuesday, March 20, 2012. Federal Reserve Chairman Ben S. Bernanke stands to gain two lieutenants with expertise on financial markets if the Senate confirms President Barack Obama's nominees to the Board of Governors. Photographer: Andrew Harrer/Bloomberg via Getty Images
Janet Yellen, former chair of the U.S. Federal Reserve, center, speaks while Jerome Powell, chairman of the U.S. Federal Reserve, left, and Ben Bernanke, former chairman of the U.S. Federal Reserve, listen during the American Economic Association and Allied Social Science Association Annual Meeting in Atlanta, Georgia, U.S., on Friday, Jan. 4, 2019. Powell said the central bank can be patient as it assesses risks to a U.S. economy and will adjust policy quickly if needed, but made clear he would not resign if President Donald Trump asked him to step aside. Photographer: Elijah Nouvelage/Bloomberg via Getty Images
Jerome Powell, chairman of the U.S. Federal Reserve, speaks during the American Economic Association and Allied Social Science Association Annual Meeting in Atlanta, Georgia, U.S., on Friday, Jan. 4, 2019. Powell said the central bank can be patient as it assesses risks to a U.S. economy and will adjust policy quickly if needed, but made clear he would not resign if President Donald Trump asked him to step aside. Photographer: Elijah Nouvelage/Bloomberg via Getty Images
Jerome Powell, chairman of the U.S. Federal Reserve, speaks during the American Economic Association and Allied Social Science Association Annual Meeting in Atlanta, Georgia, U.S., on Friday, Jan. 4, 2019. Powell said the central bank can be patient as it assesses risks to a U.S. economy and will adjust policy quickly if needed, but made clear he would not resign if President Donald Trump asked him to step aside. Photographer: Elijah Nouvelage/Bloomberg via Getty Images
WASHINGTON, Dec. 19, 2018 -- U.S. Federal Reserve Chairman Jerome Powell speaks during a press conference in Washington D.C., the United States, on Dec. 19, 2018. The U.S. Federal Reserve on Wednesday raised short-term interest rates by a quarter of a percentage point, but signaled a slower pace of rate hikes next year as the U.S. economy is expected to cool down. (Xinhua/Liu Jie) (Xinhua/Liu Jie via Getty Images)
WASHINGTON, Dec. 19, 2018 -- U.S. Federal Reserve Chairman Jerome Powell speaks during a press conference in Washington D.C., the United States, on Dec. 19, 2018. The U.S. Federal Reserve on Wednesday raised short-term interest rates by a quarter of a percentage point, but signaled a slower pace of rate hikes next year as the U.S. economy is expected to cool down. (Xinhua/Liu Jie) (Xinhua/Liu Jie via Getty Images)
WASHINGTON, Dec. 19, 2018 -- U.S. Federal Reserve Chairman Jerome Powell speaks during a press conference in Washington D.C., the United States, on Dec. 19, 2018. The U.S. Federal Reserve on Wednesday raised short-term interest rates by a quarter of a percentage point, but signaled a slower pace of rate hikes next year as the U.S. economy is expected to cool down. (Xinhua/Liu Jie) (Xinhua/Liu Jie via Getty Images)
Jerome Powell, chairman of the U.S. Federal Reserve, left, and Steven Mnuchin, U.S. Treasury secretary, arrive for a Financial Stability Oversight Council (FSOC) meeting at the U.S. Treasury in Washington, D.C., U.S., on Wednesday, Dec. 19, 2018. When Mnuchin fingered high-frequency trading and the Volcker Rule as factors behind recent misery in the stock market he left out some other possibilities that might be contributing. Namely, the White Houses's ongoing trade conflict with China and President Donald Trump's threat last week to shut down the government. Photographer: Al Drago/Bloomberg via Getty Images
Steven Mnuchin, U.S. Treasury secretary, center, speaks during a Financial Stability Oversight Council (FSOC) meeting at the U.S. Treasury in Washington, D.C., U.S., on Wednesday, Dec. 19, 2018. When Mnuchin fingered high-frequency trading and the Volcker Rule as factors behind recent misery in the stock market he left out some other possibilities that might be contributing. Namely, the White Houses's ongoing trade conflict with China and President Donald Trump's threat last week to shut down the government. Photographer: Al Drago/Bloomberg via Getty Images
Steven Mnuchin, U.S. Treasury secretary, center, speaks while Jerome Powell, chairman of the U.S. Federal Reserve, left, and Jay Clayton, chairman of the Securities and Exchange Commission (SEC), listen during a Financial Stability Oversight Council (FSOC) meeting at the U.S. Treasury in Washington, D.C., U.S., on Wednesday, Dec. 19, 2018. When Mnuchin fingered high-frequency trading and the Volcker Rule as factors behind recent misery in the stock market he left out some other possibilities that might be contributing. Namely, the White Houses's ongoing trade conflict with China and President Donald Trump's threat last week to shut down the government. Photographer: Al Drago/Bloomberg via Getty Images
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"We can't rule out a dot plot showing zero hikes, but the danger for the FOMC in taking such a drastic step is that markets would then take any soft data over the next few weeks as an open door to start pushing hard for easing," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

The 12-member Federal Open Market Committee last voted to increase its benchmark interest rate by a quarter percentage point, bringing it to a target range of between 2.25% and 2.5% in December.

Officials have since then signaled they would take a more cautious stance toward monetary policy, citing recent stock-market turbulence, ongoing trade tensions, and dimmer expectations for global growth. At the last meeting in January, they dropped a reference to "further gradual increases."

Still, some see a possibility for at least one of the two rate increases that had previously been penciled in for the year. There have been signs of upward pressure on wages, with average hourly earnings jumping by the most in a decade in February. 

"When it comes to making policy decisions, we interpret the Fed’s preference for patience as one of timing, indicating the current hiking cycle hasn’t ended quite yet," said Charlie Ripley, senior market strategist for Allianz Investment Management.

The Fed is also expected to reveal details on plans to hold a larger balance sheet than previously expected. In 2017, the central bank began reducing the $4 trillion portfolio of US Treasury debt and other assets it acquired following the financial crisis.

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