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Washington. — The Federal Reserve cut interest rates for the third time this year as the US economy continued slowing amid ongoing trade disputes and weak global growth.
The federal funds rate, which affects the cost of mortgages, credit cards and other borrowing, will now hover between 1,5 percent and 1,75 percent.
Federal Reserve Chairman Jerome Powell strongly suggested at a press conference Wednesday that the Fed would hold rates steady for the foreseeable future. Powell said the current level is “likely to remain appropriate” given the Fed’s economic outlook of moderate economic growth, a strong labor market and inflation growing at around 2 percent.
“If that changes, the Fed will respond accordingly,” Powell said.
Rate cuts during an economic expansion aren’t common, but they aren’t unprecedented either. The Fed similarly made what former Fed Chairman Alan Greenspan called “insurance cuts” in 1995 and 1998. The Fed quickly went back to rate hikes after those moves.
Yet, despite the fact that there is little wiggle room left to cut rates further should the economy suddenly start shrinking, Powell said he doesn’t believe the Fed is about to start raising rates anytime soon.
“We would need to see a really significant move up in inflation . . . before we would consider raising rates to address inflation concerns,” he said.
Two voting members of the policy-setting committee — Kansas City Fed President Esther George and Boston Fed President Eric Rosengren — dissented against the decision to lower interest rates by a quarter of a percentage point. Policymakers painted a mostly rosy picture of the US economy in their statement, pointing to “solid” job gains and household spending rising at a”strong pace,” but also noted that business investment and exports continued to “remain weak.” — CNN Business.
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