US Fed lowers interest rate for first time in decade
July 31, 2019
The Federal Reserve lowered interest rates by a quarter point on Wednesday, in the first cut in over a decade.
The cuts brought down the US central bank's benchmark overnight lending rate to a target range of 2.00% to 2.25%.
The rate lowered on Wednesday impacts the cost of several types of businesses and consumer loans, including credit cards and mortgages.
Economists and investors had expected the move, which comes at the end of the Fed's two-day policy meeting. Stocks wobbled slightly after the announcement on Wednesday afternoon, then turned lower about half an hour later. Prices of short-term US government bonds fell, sending yields higher.
In a statement, the Fed said it decided to make the cuts "in light of the implications of global developments for the economic outlook as well as muted inflation pressures."
They added that they will "continue to monitor" economic outlooks, adding that the cuts will help to sustain a record-long US economic expansion.
Federal Reserve Chairman Jerome Powell said that further interest rate cuts may be on the horizon, but that it is not planning on launching a longer series of cuts.
"Let me be clear. I said it's not the beginning of a long series of rate cuts. I didn't say it's just one or anything like that," Powell said at a press conference later on Wednesday.
Pressure from Trump
The move comes as US unemployment is at a historic 3.6% low and amid pressure from US President Donald Trump.
Trump, who has been urging for the Fed to lower rates to further boost economic growth, is likely to welcome the move and to also call for further cuts.
Powell pushed back against concerns that the US president was interferring too much in the Fed, saying that "we do not take political considerations into account."
Some economists argued that the extra incentives were unnecessary in light of the unemployment rate and only average job creation.
Others, however, said the Fed is smart to insure itself amid global economic uncertainties caused by Trump's trade war with China and the unknown outcome of the United Kingdom's impending exit from the European Union.
rs/jm (AP, Reuters, dpa)