BUSINESS US Fed cuts rate first time in a decade

BUSINESS

US Fed cuts rate first time in a decade

By Wu Lejun | People's Daily app

02:35, August 01, 2019

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Federal Reserve Chairman Jerome Powell addresses press conference in Washington, DC, on July 31, 2019. (Photo: Wu Lejun)

Washington (People's Daily) -- The US Federal Reserve lowered its benchmark interest rate Wednesday by a quarter-point to a range of 2 to 2.5 percent. It is the first reduction in a decade.

And the Fed says it will stop shrinking its securities holdings in August, two months earlier than previously planned.

Fed chairman Jerome Powell said the rate cut should be viewed as a "mid-cycle adjustment" to monetary policy and he believes the entire evolution of the Fed's policy outlook this year, with a move from a hawkish to a dovish path, has helped the economy.

He added a rate cut "seems to work through confidence channels," as well as through lowering the cost of short-term borrowing.

In a statement issued by the Federal Open Market Committee (FOMC), it said the labor market remains strong and that economic activity has been rising at a moderate rate. As Powell indicated, the US economy remains stable and resilient.

But uncertainty about the trade war and slowing global growth threaten the economic outlook. The Fed has said it is concerned by uncertainties around trade wars and slowing global growth and the fact that inflation is stubbornly below its 2 percent target.

The Fed also announced it will end the program to roll down its balance sheet, and once more buy securities to replace those that are maturing. The program is expected to end in October.

“I think the US economy is strong enough right now and does not need an interest rate cut. It is just going to fuel a further increase in stock and property markets,” said Robert Dekle, a professor of Economics at the University of Southern California.

However, US President Donald Trump was unimpressed with the Federal Reserve's interest rate cut and scorned Fed chair Jerome Powell in his tweet, saying: "As usual, Powell let us down."

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