US Fed cuts interest rates, signals it is on hold

Federal Reserve Chair Jerome Powell holds a news 

conference following the Oct. 29-30 Federal Open 

Market Committee meeting in Washington, US, 

30 October – Reuters 

WASHINGTON (Reuters): The Federal Reserve on Wednesday cut interest rates for the third time this year to help sustain US growth despite a slowdown in other parts of the world, but signalled there would be no further reductions unless the economy takes a turn for the worse.

“We believe that monetary policy is in a good place,” Fed Chair Jerome Powell said in a news conference after the US central bank announced its decision to cut its key overnight lending rate by a quarter of a percentage point to a target range of between 1.50% and 1.75%.

“We took this step to help keep the economy strong in the face of global developments and to provide some insurance against ongoing risks,” he said. “We see the current stance of monetary policy as likely to remain appropriate as long as incoming information about the economy remains broadly consistent with our outlook.” Powell’s comments clash with President Donald Trump’s demands that the Fed cut rates even deeper to boost economic growth that ebbed to a 1.9% annual rate in the third quarter, well below the 3% level Trump pledged would flow from a round of tax cuts and other actions nearly two years ago.

But the Fed’s new stance also vouched for both the seeming durability of a US economic expansion that is now the longest on record.

In his news conference, Powell ticked off an extensive list of reasons why he feels the economy is doing well, and likely to continue to do so under the current stance of monetary policy - from robust consumer spending, strengthening home sales, and asset prices he considered healthy but not to a level of excess.

As well, Powell said, some of the risks that had most unnerved Fed officials, and convinced them lower rates were needed if only as “insurance,” have seemed to abate in recent weeks.The US-China trade war was “a step closer” to resolution, Powell said, and it looked less likely that Britain would crash out of the European Union.

The outlook for the US economy continues to be for “moderate” growth, a strong labour market and inflation rising back to the Fed’s 2% annual goal, he said, and only “a material reassessment” of that outlook could drive the central bank to cut rates further from here.

In the statement accompanying its decision to cut rates, the Fed dropped a previous reference that it “will act as appropriate” to sustain the economic expansion – language that was considered a sign for future rate cuts.

Instead, the central bank said it will “monitor the implications of incoming information for the economic outlook as it assesses the appropriate path” of its target interest rate, a less decisive phrase.