- The Federal Reserve Board’s rate-setting Federal Open Market Committee lowered its short-term interest rate a quarter point to a range of 1.5% to 1.75% to protect economic growth against ongoing weak business investment, trade tensions and the broader global economic slowdown.
- Although the economy has proven resilient with solid job gains, low unemployment and a strong rise in household spending, the move will "help keep the U.S. economy strong in the face of global developments, and [will] provide some insurance against ongoing risks," Fed Chair Jerome Powell said.
- This is the third time since July the Fed has lowered rates, but unlike the previous two times, the board is signaling no additional rate cuts unless the economy takes a material turn for the worse.
Powell said in remarks yesterday that the stance in policy is likely to remain appropriate "as long as incoming information about the economy remains broadly consistent" with the board’s projections.
The vote among board members wasn’t unanimous. As they have in the previous two rate reductions, Esther George, president and CEO of the Federal Reserve Bank of Kansas City, and Eric Rosengren, president and CEO of the Federal Reserve Bank of Boston, voted against the move on the grounds that lower rates aren’t needed.
"While weakness in manufacturing and business investment is evident, it is not clear that monetary policy is the appropriate tool to offset the risks faced by businesses in those sectors when weighted against the costs that could be associated with such action," George said earlier this month.
The Fed was under some pressure to lower rates just because of market expectations, the Wall Street Journal reported.
"Fed officials don't like to act just because markets expect it," the Journal said. "But with investors assigning a greater than 90% probability to a rate cut in future markets over the past week, failing to deliver could have led to a stock selloff and higher borrowing costs that potentially undercut the benefit of the Fed's recent cuts."