9/18/2019

Fed Cuts Interest Rates Again

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As expected, the Federal Reserve lowered its benchmark interest rate by one-quarter percentage point to a range of 1.75%-2%.

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As expected, the Federal Reserve lowered its benchmark interest rate by one-quarter percentage point to a range of 1.75%-2%.

The reduction is the central bank’s second in two months. Chairman Jerome Powell says the cut is intended to maintain a strong American economy in the face of “notable developments” that could sap momentum.

Powell notes that trade wars are reducing business investment, an element he says the Fed “really can’t address.”

The Fed was internally split about today’s reduction. Seven board members felt that the cut was justified by weakening global markets and a too-low inflation rate. One thought a half-point reduction would be more appropriate. Two others argued that strong consumer spending shows that the American economy doesn’t need stimulating.

The bank predicts inflation won’t reach its target level of 2% until 2021 and says unemployment is likely to average 3.7% this year and next.


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