Fed Cuts Interest Rates by a Quarter Percentage Point to a Range of 2.00% to 2.25%

August 01, 2019

The Federal Reserve cut interest rates on Wednesday for the first time since 2008, citing concerns about the global economy and weak inflation in the United States.

The US central bank signaled its willingness to further cut borrowing costs if needed.

In a widely expected move within financial markets, the Fed reduced its key overnight lending rate by a quarter of a percentage point to a target range of 2.00% to 2.25%.

In a statement at the end of a two-day policy meeting, the Fed said it decided to cut rates “in light of the implications of global developments for the economic outlook as well as muted inflation pressures.”

It said it will “continue to monitor” how incoming information affects the economy and that it will “act as appropriate to sustain” the expansion.

The Fed’s policy decision drew dissents from Boston Fed President Eric Rosengren and Kansas City Fed President Esther George who argued for leaving rates unchanged.

Rosengren and George have raised doubts about a rate cut in the face of the current expansion, an unemployment rate that is near a 50-year-low, and robust household spending.

On the opposite flank, U.S. President Donald Trump, is likely to be disappointed that the central bank has not cut interest rate significantly. Trump has repeatedly criticized the Federal Reserve and its chairman, Jerome Powell, for not doing enough to help his administration in its efforts to boost economic growth.

Powell and other Fed officials have walked a middle ground, flagging risks like continued uncertainty on the global trade front, low inflation and a weakening world economy, but repeating the view the United States is fundamentally in a good spot.

The Fed said in its statement it continued to regard the labor market as “strong” and added that household spending had “picked up.” But it noted business spending was “soft”.

The Fed said the rate cut should help return inflation to its 2% target but that uncertainties about that outlook remain. Sustained expansion of economic activity and a strong labor market are also the most likely outcomes, the Fed said.

(Reuters)