US Fed cuts interest rate for second time in a row
20 September 2019
The Federal Open Market Committee (FOMC) of the US Federal Reserve on Wednesday effected the second rate cut in a row, slashing policy interest rates by 25 basis points to 1.75-2.00 per cent, citing global uncertainties.
The rate cut, the second since the 2008 financial market meltdown, follows a moderation on economic activity, weak business fixed investment and exports as well as global uncertainties, the Fed said in a release.
The FOMC said the decision is consistent with its statutory mandate, to foster maximum employment and price stability. “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 1-3/4 to 2 per cent.”
The Federal Reserve also pumped more dollars into financial markets, flooding the markets for a third straight day, in another attempt to keep interest rates from moving higher.
The central bank has injected a total of $203 billion into markets - $75 billion on both Wednesday and Thursday, and $53 billion on Tuesday.
This week marked the first time the central bank has taken such steps since the global financial crisis 10 years ago.
This action, it said, supported the committee's view that sustained expansion of economic activity, strong labor market conditions, and inflation near the 2 per cent objective, adding that uncertainties about this outlook remained.
The FOMC said information received since its July meeting indicated that the labor market remained strong and that economic activity has been rising at a moderate rate. Job gains have been solid, on average, in recent months, and the unemployment rate has remained low.
Although, household spending has been rising at a strong pace, business fixed investment and exports have weakened, it added.
Overall inflation and inflation for items other than food and energy are running below 2 per cent, the FOMC noted.
The committee said it would continue to monitor the market before contemplating any changes to the future path of the target range for the federal funds rate. The committee will also assess realised and expected economic conditions relative to its maximum employment objective and its symmetric 2 per cent inflation objective.