Fed votes to cut interest rates for the first time since 2008

Fed votes to cut interest rates for the first time since 2008

Fed Chairman Jerome Powell today during his testimony before the Senate Federal Reserve Board's semiannual report to Congress 2018, (Photo ©2018 Doug Christian/TMN)
After Fed Chairman Jerome Powell gave a speech Friday morning, President Donald Trump attacked him on Twitter. (File photo ©2018 Doug Christian/TMN)

WASHINGTON – The Federal Reserve decided Wednesday to cut interest rates by a quarter of a percentage point, the central bank’s Federal Open Market Committee (FOMC) said in a statement.

“In light of the implications of global developments for the economic outlook as well as muted inflation pressures, the Committee decided to lower the target range for the federal funds rate to 2 to 2-1/4 percent,” the statement said.

It continued: “This action supports the Committee’s view that sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective are the most likely outcomes, but uncertainties about this outlook remain. 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 percent objective.”

Chairman Jerome Powell hinted to Congress earlier this month that the Fed likely would cut rates in response to growing economic uncertainty.

Wednesday’s modest rate adjustment conforms with what analysts predicted. It is the first rate cut since 2008.

President Donald Trump has repeatedly bashed the Fed and urged Powell to lower rates.

The central bank had kept its federal fund rates at 2.25% to 2.50% since January.

The Fed made four modest rate increases in 2018.

Trump has blamed the rate increases for the economy not growing at 4% GDP last year. The economy grew at 3.1% in 2018.

The economy grew at 2.1% in the second quarter of this year.

The Fed has generally lowered interest rates when the economy is slow in order to encourage borrowing. The Fed has generally raised rates when the economy is booming.

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