Federal Reserve Cuts Interest Rates For First Time Since 2008

WASHINGTON, July 31 (Reuters) – The Federal Reserve cut interest rates on Wednesday for the first time since 2008, citing concerns about the global economy and muted U.S. inflation, and signaled a readiness to lower borrowing costs further if needed.

Financial markets had widely expected the quarter-percentage-point rate cut, which lowered the U.S. central bank’s benchmark overnight lending rate to a target range of 2.00% to 2.25%.

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

The Fed said it will “continue to monitor” how incoming information will affect the economy, adding that it “will act asappropriate to sustain” a record-long U.S. economic expansion.

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

Both 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 the Fed did not deliver the large rate cut hehad demanded. Trump has repeatedly harangued the central bank and Fed Chairman Jerome Powell for not doing enough to help his administration’s efforts to boost economic growth.

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

Powell is expected to elaborate on the Fed’s thinking in a news conference at 2:30 p.m. EDT (1830 GMT).

The Fed said in its statement that it continued to regard the labor market as “strong” and added that household spendinghad “picked up.” But it noted business spending was “soft” and that measures of inflation compensation remain low.

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.

Underscoring its decision to ease policy across the board, the Fed also said it would stop shrinking its massive holdings of bonds starting Aug. 1, two months ahead of schedule.

(Reporting by Ann Saphir and Jason Lange Editing by Paul Simao)

Source Link

Get more stuff like this

Subscribe to our mailing list and get interesting stuff and updates to your email inbox.