Published: Thu, August 01, 2019
Markets | By Erika Turner

Fed is poised to cut rates for first time in a decade

Fed is poised to cut rates for first time in a decade

The Federal Reserve reduced interest rates for the first time since the financial crisis and hinted it may cut again this year to insulate the record-long USA economic expansion from slowing global growth.

"Uncertainty toward the timing and scope of additional action leaves markets more sensitive to signals of future policy measures than the well-telegraphed rate cut looming at present". Prices of short-term USA government bonds fell after the announcement, sending yields higher.

"We may get a dissent or two, but it seems like a 25-basis-point cut is pretty much locked in", said Julia Coronado, president and founder of MacroPolicy Perspectives LLC in NY.

The S&P 500 fell as much 1.8% after the Federal Reserve cut its benchmark interest rate for the first time since the financial crisis. In yesterday's note, we talked about how the votes was one of the most important aspects of the policy decision.

Many of these former officials say it would be wise to stimulate the US economy with slightly lower rates to try to counteract the negative effects of Trump's trade war and weak growth overseas. Rising trade tensions between the USA and China have served as a brake on worldwide trade.

Financial markets will also watch for an early end to the runoff of securities from the Fed's balance sheet. A study Tumin conducted during Fed rate decreases in 2007 found banks initially lower savings rates by about half the size of the Fed's cut and then catch up to match the central bank's move within several months.

However, economists had been expecting the central bank to lower its headline rate as economic growth slows.

The Fed's policy decision drew dissents from Boston Fed President Eric Rosengren and Kansas City Fed President Esther George who argued for leaving rates unchanged. So why would the Federal Reserve consider cutting interest rates, a move usually made to shore up a feeble economy?

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Based on analysis by the company, that includes around 100 million people in the US and 6 million in Canada . Thompson once worked for Amazon Web Services, which hosted the Capitol One database that was breached .

The cut was opposed by two members of the Fed's Open Markets Committee, the body responsible for setting rates.

The move would come despite a strong USA economy.

Powell has repeatedly said the Fed's "overarching goal" is to keep growth going. Lowering the Fed's key short-term rate is meant to encourage borrowing and spending and energize the economy. As a result, a Fed rate cut will likely be passed along to auto buyers within weeks, Rick says.

He had heaped pressure on Jerome Powell, the central bank's chairman, and trashed him in public - despite having nominated him in the first place.

The central bank hopes the rate cut will counter threats to the US economy ranging from uncertainties caused by the nation's trade disputes to chronically low inflation and a dimming global growth outlook.

The last time the Fed cut rates was in 2008 when unemployment was over 7 percent, the stock market had lost a third of its value, and Lehman Brothers had declared bankruptcy. But it noted that business spending was "soft".

Some analysts foresee two or even three rate cuts this year as the Fed tries to counter global threats that risk spreading to the United States - not just prolonged trade rifts but also a potentially botched exit by Britain from the European Union, a weaker China and the risk of a recession in Europe.

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