US Fed hints at interest rate cut
Print Edition
The US Federal Reserve opened the door to an interest rate cut on Wednesday, vowing to act to keep the economy growing as uncertainties about trade and other issues mount.
Federal Reserve Chief Jerome Powell said trade friction and slowing growth worldwide have led many central bankers to feel the case for an interest rate cut has “strengthened” but most still want to see more data before making a move.
But one policymaker dissented in the vote, seeking an immediate cut — something US President Donald Trump has been calling for loudly and which many economists say is vital given the damage done by the escalating trade frictions.
The policy-setting Federal Open Market Committee kept the key rate in the 2.25-2.5 percent range but sent a strong signal of possible cuts ahead, saying “uncertainties about this outlook have increased” and the Fed “will act as appropriate to sustain the expansion.”
After the meeting, Powell confirmed monetary policy could soon become more “accommodative,” a byword for lowering the rate that serves as the basis for all types of lending from autos to homes to credit cards.
“Uncertainties surrounding the outlook have clearly risen since our last meeting” and officials are “mindful of ongoing cross-currents, including trade developments and concerns about global growth,” he said.
“While the baseline outlook remains favorable,” he said, “many FOMC participants now see that the case for somewhat more accommodative policy has strengthened.”
But he cautioned that it is important they not overreact to single bits of data or a “short-term swing in sentiment.”
Markets are almost universally predicting multiple Fed moves this year and seem to view the Fed stance as dovish enough for now, with the three major stock indexes closing with modest gains following the announcement.
However, Trump may be disappointed not to get a rate cut, since he has accused the Fed of undercutting his efforts to supercharge the economy.
He even hinted on Tuesday he might remove Powell from his post but the Fed chairman said on Wednesday he believes the law is clear that he has a four-year term. “I fully intend to serve it,” Powell said.
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