- Title: Fed lowers interest rates as expected, leaves door open to more cuts
- Date: 31st July 2019
- Summary: WASHINGTON, D.C., UNITED STATES (JULY 31, 2019) (UNRESTRICTED POOL) (SOUNDBITE) (English) CHAIRMAN OF THE FEDERAL RESERVE, JEROME POWELL, SAYING: "[APPROACHING LECTERN] Good afternoon and welcome. We decided today to lower the target for the federal funds rate by a quarter of a percentage point to a range of 2% to 2 1/4 percent. The outlook for the U.S. economy remains favorable and this action is designed to support that outlook point." REPORTERS / POWELL (SOUNDBITE) (English) CHAIRMAN OF THE FEDERAL RESERVE, JEROME POWELL, SAYING: "It is intended to insure against downside risks from weak global growth and trade policy uncertainty, to help offset the effects these factors are currently having on the economy and to promote a faster return of inflation to our symmetric 2% objective. All of these objectives will support achievement of our overarching goal - to sustain the expansion with a strong job market and inflation close to our objective for the benefit of the American people." REPORTERS (SOUNDBITE) (English) CHAIRMAN OF THE FEDERAL RESERVE, JEROME POWELL, SAYING: "Through the course of the year, weak global growth, trade policy uncertainty and muted inflation have prompted the FOMC [Federal Open Market Committee] to adjust its assessment of the appropriate path of interest rates. The committee moved from expecting rate increases this year to a patient stance about any changes and then to today's action. The median committee participants assessments of the neutral rate of interest in the longer run, normal rate of unemployment have also declined this year, reinforcing the case for a somewhat lower path for our policy rate." MORE OF REPORTERS (SOUNDBITE) (English) CHAIRMAN OF THE FEDERAL RESERVE, JEROME POWELL, SAYING: "The domestic inflation shortfall has continued. Core inflation, which excludes food and energy prices and is a better gauge of future developments than is total inflation has run at 1.6% over the past 12 months. We continue to expect that inflation will return over time to 2%. But domestic inflation pressures remain muted and global disinflationary pressures persist. Wages are rising but not at a pace that would put much upward pressure on inflation. We're mindful that inflation's returned to 2% may be further delayed, and that continued below target inflation could lead to a worrisome and difficult to reverse downward slide in longer term expectations. So, taking all of that on board the committee still sees a favorable baseline outlook. Over the year however incoming information on global growth trade policy uncertainty and muted inflation have led the committee to gradually lower its assessments of the path of policy interest rate that would best support that outlook. Today we judge that those factors warrant the policy adjustment I described. As the committee contemplates the future path of the target range for the federal funds rate, it will continue to monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion with a strong labor market and inflation near its symmetric 2% objective." SIDE VIEW OF POWELL SPEAKING
- Embargoed: 14th August 2019 20:16
- Keywords: Federal Reserve U.S. President Donald Trump Fed Chairman Jerome Powell Fed cuts economic growth
- Location: WASHINGTON, DC, UNITED STATES
- City: WASHINGTON, DC, UNITED STATES
- Country: USA
- Topics: Economic Events
- Reuters ID: LVA001AQ40YTJ
- Aspect Ratio: 16:9
- Story Text:The Federal Reserve cut interest rates on Wednesday (July 31) 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%.
"The outlook for the U.S. economy remains favorable and this action is designed to support that outlook point," Fed Chairman, Jerome Powell, said during a briefing.
And in a statement at the end of its latest two-day policy meeting, the Fed said it had decided to cut rates "in light of the implications of global developments for the economic outlook as 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 as appropriate 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 he had 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 the global 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 spending had "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.
(Production by: Dan Fastenberg)
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