Fed cuts rates, signals it may not need to do more

[webfact]

Fed cuts rates, signals it may not need to do more

By Ann Saphir and Jason Lange

 

Federal Reserve Chair Jerome Powell holds a news conference following the Federal Reserve's two-day Federal Open Market Committee Meeting in Washington, U.S., July 31, 2019. REUTERS/Sarah Silbiger

 

WASHINGTON (Reuters) - The Federal Reserve cut interest rates on Wednesday to shore up the economy against risks including global weakness, but the head of the U.S. central bank said he did not view the move as the start of a lengthy series of rate cuts.

 

Fed Chairman Jerome Powell cited global weakness, simmering trade tensions and a desire to boost too-low inflation in explaining the central bank's decision to lower borrowing costs for the first time since 2008 and move up plans to stop winnowing its massive bond holdings.

Financial markets had widely expected the Fed to reduce its key overnight lending rate by a quarter of a percentage point to a target range of 2.00% to 2.25%, but many traders expected a clearer confirmation of forthcoming rate cuts.

 

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 central bank also said it will "continue to monitor" how incoming information will affect the economy and "will act as appropriate to sustain" a record-long U.S. economic expansion.

 

The Federal Reserve cut interest rates on Wednesday for the first time since 2008. Federal Reserve Chairman Jerome Powell cited concerns about the global economy and muted U.S. inflation, and left the door open to further cuts. Rough Cut (no reporter narration).

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%.

Powell said the Fed will "continue to monitor" how incoming information will affect the economy.

U.S. stock prices, which had largely drifted sideways earlier Wednesday as investors awaited the meeting's outcome, moved lower after news of the rate cuts. The benchmark S&P 500 Index was down fractionally after briefly falling to the day's low.

 

"It's smart of them to go ahead and take out some insurance here. It's better than none at all," said Brett Ewing, chief market strategist at First Franklin Financial Services in Tallahassee, Florida.

 

Powell, speaking in a news conference after the release of the Fed statement, characterized the rate cut as "a mid-cycle adjustment to policy," comments that do not imply sharp further cuts are on the way.

 

U.S. stock prices fell after the Fed's statement and during Powell's press conference. The benchmark S&P 500 index <.SPX> was down 0.8%. Yields on 2-year notes <US2YT=RR>, a proxy for Fed policy rates, rose to 1.88%.

 

Heading into Wednesday's Fed decision, the S&P 500 was up about 3% since June 19, when the Fed first signaled a rate cut was likely as it pledged then to "act as appropriate to sustain the expansion."

 

"My feeling is that what started off the firestorm was a comment by Powell that suggested we're one and done," said Jim Paulsen, chief investment strategist for the Leuthold Group.

 

The U.S. dollar index <.DXY> gained ground to touch its highest in more than two years. The index, which measures the greenback against a basket of currencies, was up about 0.5% on the day.

 

TWO 'NO' VOTES

The Fed's policy decision drew dissents from Boston Fed President Eric Rosengren and Kansas City Fed President Esther George who argued for leaving rates unchanged.

 

"This is the most dissent we've had in the current Fed; we had two hawkish dissenters on this decision," said Eric Donovan, managing director of over-the-counter foreign exchange and interest rates at INTL FCStone.

 

Rosengren and George 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 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.

 

The Fed said in its statement 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 $3.6 trillion in bond holdings starting Aug. 1, two months ahead of schedule.

 

"I think ending the quantitative tightening right here was also a good call," First Franklin's Ewing said.

 

(Reporting by Ann Saphir and Jason Lange; Additional reporting by Trevor Hunnicutt, Caroline Valetkevitch, Lewis Krauskopf and Herbert Lash in New York; Editing by Paul Simao and Dan Burns)

 

-- © Copyright Reuters 2019-08-01

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[Tug]

Desperately trying to keep donalds economy alive?

[pegman]

33 minutes ago, Tug said:

Desperately trying to keep donalds economy alive?

Funny how Obama's economy never needed any stinking rate cuts. 

[nauseus]

25 minutes ago, pegman said:

Funny how Obama's economy never needed any stinking rate cuts. 

Quite hard to cut something from nothing. How about some QE instead?

[EVENKEEL]

36 minutes ago, pegman said:

Funny how Obama's economy never needed any stinking rate cuts. 

You might want to rethink that statement.

[bristolboy]

3 minutes ago, EVENKEEL said:

You might want to rethink that statement.

You're right about that. But what is funny is how Republicans opposed the Fed taking any measures to stimulate the economy when unemployment was at 9.1%,

 G.O.P. Urges No Further Fed Stimulus

https://www.nytimes.com/2011/09/21/business/economy/gop-urges-no-further-fed-stimulus.html?hp

One of Trump's current nominees for a post at the Fed typifies this. She was bitterly opposed to rate cuts in the wake of the great recession but now enthusiastically supports them.

[Cryingdick]

56 minutes ago, pegman said:

Funny how Obama's economy never needed any stinking rate cuts. 

 

I presume this is sarcasm.

[EVENKEEL]

7 minutes ago, bristolboy said:

You're right about that. But what is funny is how Republicans opposed the Fed taking any measures to stimulate the economy when unemployment was at 9.1%,

 G.O.P. Urges No Further Fed Stimulus

https://www.nytimes.com/2011/09/21/business/economy/gop-urges-no-further-fed-stimulus.html?hp

One of Trump's current nominees for a post at the Fed typifies this. She was bitterly opposed to rate cuts in the wake of the great recession but now enthusiastically supports them.

Much like the Dems will try to derail our economy leading up to elections.

[Joe Mcseismic]

2 minutes ago, EVENKEEL said:

Much like the Dems will try to derail our economy leading up to elections.

Really?

https://voxeu.org/article/us-economy-performs-better-under-democratic-presidents-why

[Tug]

Just more corporate welfare money to keep donalds bubble inflated how’s that deficit doing?dont think the dems need to or would do anything to wreck the economy 

[bristolboy]

1 hour ago, EVENKEEL said:

Much like the Dems will try to derail our economy leading up to elections.

Got details? Or is  this just another lie?

[Joe Mcseismic]

3 hours ago, EVENKEEL said:

Much like the Dems will try to derail our economy leading up to elections.

The Dems don't have the same philosophy. You know, the one that Republicans have. Party over country. Moscow Mitch is a good example.

[Wake Up]

All of the politicians at the top of both Republican and Democratic parties are bought and paid for by lobbyists. Same in most countries in the world the top politicians are crooks.  The rest of us are sheep fed our daily meal to keep us from revolting.  History shows once the revolution occurs another group of crooks start the process all over again with different emblems.  Not a cynical person just a lover of reading about history of humans. We humans have a continual desire to fight wars and pursue conflict for popular leaders, religion, greed, insecurity, and vanity. With some notable exceptions most leaders are tyrants. Most people are good until they become leaders and succumb to the temptations of life.  Worship no man or woman because the few people on the planet that deserve praise will not need it, ask for it or want it. ☮️ 

[bristolboy]

1 minute ago, Wake Up said:

All of the politicians at the top of both Republican and Democratic parties are bought and paid for by lobbyists. Same in most countries in the world the top politicians are crooks.  The rest of us are sheep fed our daily meal to keep us from revolting.  History shows once the revolution occurs another group of crooks start the process all over again with different emblems.  Not a cynical person just a lover of reading about history of humans. We humans have a continual desire to fight wars and pursue conflict for popular leaders, religion, greed, insecurity, and vanity. With some notable exceptions most leaders are tyrants. Most people are good until they become leaders and succumb to the temptations of life.  Worship no man or woman because the few people on the planet that deserve praise will not need it, ask for it or want it. ☮️ 

Typical, cliched analysis. No facts, just generalizations.

[lannarebirth]

7 hours ago, Tug said:

Just more corporate welfare money to keep donalds bubble inflated how’s that deficit doing?dont think the dems need to or would do anything to wreck the economy 

Every party does something to wreck the economy. Some of the measures they take are longer lasting than others. It is going to be hard to come back from the huge wealth disparity that prolonged ZIRP and QE 2 and 3 caused. Anyone with assets saw a huge inflation in the vaue of those assets. Anyone without them sees attaining them near out of reach.

[zydeco]

And all this has caused Biff to go on a twitter rage, demanding ZIRP and "the biggest QE eveh."  Spineless Powell gave in this time and will probably do it again. No money for savers. Just transfer all the wealth to the one percent and the banks.

[lannarebirth]

5 minutes ago, zydeco said:

And all this has caused Biff to go on a twitter rage, demanding ZIRP and "the biggest QE eveh."  Spineless Powell gave in this time and will probably do it again. No money for savers. Just transfer all the wealth to the one percent and the banks.

 

Even though Powell rolled over, I expect Trump to start beating up on him again, as early as tomorrow.

[zydeco]

6 minutes ago, lannarebirth said:

 

Even though Powell rolled over, I expect Trump to start beating up on him again, as early as tomorrow.

It's already started.  

 

[IAMHERE]

13 hours ago, pegman said:

Funny how Obama's economy never needed any stinking rate cuts. 

There was almost a tripling of the stock market from those cuts after he got elected. Make that kind of money and of course you can hold your nose. 

[pegman]

15 hours ago, Cryingdick said:

 

I presume this is sarcasm.

This says all the fed rate reductions stemming from the Great Recession were under Bush. Show otherwise or correct yourself.

 

https://en.m.wikipedia.org/wiki/History_of_Federal_Open_Market_Committee_actions

 

 

[pegman]

16 hours ago, EVENKEEL said:

You might want to rethink that statement.

Here, learn something. The last Fed Rate reduction was in 2008. Obama became president in 2009. My guess is your Merican, am I right? You're all so sure of yourselves when your wrong. 

 

https://en.m.wikipedia.org/wiki/History_of_Federal_Open_Market_Committee_actions

 

 

[TopDeadSenter]

The correct decision here would have been a half percent cut with assurances of further cuts. Dollar needs devaluing to allow the MAGA movement to fully bloom. Powell is doing all he can to undermine and weaken Trump. Quite sickening. The stock market concurs with me.

[pegman]

1 hour ago, TopDeadSenter said:

The correct decision here would have been a half percent cut with assurances of further cuts. Dollar needs devaluing to allow the MAGA movement to fully bloom. Powell is doing all he can to undermine and weaken Trump. Quite sickening. The stock market concurs with me.

Your right and whoever the loser was who appointed that useless Powell should lose their job over this. Agree?

[zydeco]

13 hours ago, TopDeadSenter said:

The correct decision here would have been a half percent cut with assurances of further cuts. Dollar needs devaluing to allow the MAGA movement to fully bloom. Powell is doing all he can to undermine and weaken Trump. Quite sickening. The stock market concurs with me.

Sure. Make the dollar even more worthless. Use massive debt  to transfer wealth directly to stocks for the one percent. Bankruptcy awaits. The only thing Trump has truly mastered in his lifetime.