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Fed Cuts Key Interest Rate Again

Fed Cuts Key Interest Rate Again Photo: WDIO/MGN

Updated: September 18, 2019 05:50 PM

WASHINGTON (AP) - The Federal Reserve is cutting rates for a second time this year while saying it's prepared to continue doing what it deems necessary to sustain the U.S. economic expansion.

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The Fed's move will reduce its benchmark rate by an additional quarter-point to a range of 1.75% to 2%. The Fed's key rate influences many consumer and business loans.

The economy appears durable in its 11th year of growth, with a still-solid job market and steady consumer spending. But the Fed is trying to combat threats including uncertainties caused by President Donald Trump's trade war with China, slower global growth and a slump in American manufacturing. The Fed notes in its statement that "business fixed investment and exports have weakened."

Still, the Fed's move will likely displease President Donald Trump, who has attacked the Fed and insisted that it slash rates more aggressively.

The Fed's action was approved on a 7-3 vote, with two officials arguing to keep rates unchanged and 1 arguing for a bigger half-point cut. It was the largest number of Fed dissents in three years.

Fed officials split on interest rate path

Federal Reserve officials are divided on the future path for their benchmark interest rate.

Forecasts show that seven out of 17 officials favor an additional rate cut this year that would put the federal funds rate at a range of 1.5% to 1.75%. But the outlook becomes hazier in 2020 as at least two officials expect a rate hike.

No one anticipates rates to fall below 1.5% in 2020, a sign that the current turbulence from a global slowdown and President Donald Trump's escalation of the trade war with China is viewed as manageable.

The officials' forecast for the U.S. economy barely changed from the previous predictions in June. The economy is expected at the median to grow 2.2% this year, up from the earlier forecast of 2.1%. Unemployment is projected to be 3.7%, slightly higher than the 3.6% rate in the previous forecast. Inflation is anticipated to be 1.5%, which is below the U.S. central bank's target of 2%.

Copyright 2019 The Associated Press. All rights reserved.

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