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Divided Fed cuts interest rates

Divided Fed cuts interest rates



Jerome Powell

Federal Reserve Chairman Jerome Powell | Mark Wilson/Getty Images

A divided Federal Reserve lowered interest rates a notch on Wednesday but didn’t clearly signal that another cut was in store, a move that’s bound to frustrate President Donald Trump, who has called on the central bank to slash rates to zero or below.

But while Fed officials didn’t forecast another rate reduction, they didn’t rule out the option completely.

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The Fed’s move today to cut rates by a quarter point is intended to reassure markets, companies and households amid signs that growth is slowing from its 2018 pace, though the central bank continues to expect the economy to expand over the next few years.

Fed officials nudged up their forecast of economic growth this year, projecting GDP will increase by 2.2 percent, up from a 2.1 percent estimate in June. Over the next couple of years, the Fed expects growth to drop below 2 percent, but officials stayed well away from forecasting a recession.

As the economic picture grows increasingly complex, Fed Chairman Jerome Powell is having a tougher time achieving consensus within the central bank’s rate-setting committee. Three members dissented from the decision to lower rates, which follows on another cut in July; Kansas City Fed President Esther George and Boston Fed President Eric Rosengren preferred to hold rates steady, while St. Louis Fed President Jim Bullard wanted a deeper cut.

Following the Fed’s quarter-point cut, its main borrowing rate is set between 1.75 and 2 percent.

Of the Fed’s 17 top officials, including seven who don’t have a vote this year, nearly a third didn’t see a need for today’s cut, according to a chart of officials’ best projections of the appropriate path for rates. But seven saw room for still another rate cut this year.



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