Page 10 - HOH

A4 U.S. NEWS
Thursday 1 augusT 2019

Fed cuts key rate in its first reduction in more than decade

By MARTIN CRUTSINGER Trump's pursuit of trade
AP Economics Writer conflicts, with his punishing
WASHINGTON (AP) — The tariffs on hundreds of bil-
Federal Reserve cut its key lions of dollars in Chinese
interest rate Wednesday for and European goods, have
the first time in a decade escalated uncertainties
to try to counter threats for American companies.
ranging from uncertain- Some companies have put
ties caused by President off plans to expand and in-
Donald Trump's trade wars vest.
to chronically low inflation Powell has also expressed
and a dim global outlook. concern about undesirably
The Fed also repeated a low inflation. In delivering
pledge to "act as appro- the Fed's semiannual mon-
priate to sustain the ex- etary report to Congress
pansion" — wording that this month, he noted that
the financial markets have the central bank needs to
interpreted as a signal of prevent the economy from
possible future rate cuts. sinking into a low-inflation
Stocks tumbled soon after trap like the one that has
the Fed issued its statement bedeviled Japan's econo-
at 2 p.m. Eastern time. The Federal Reserve Chairman Jerome Powell speaks during a news conference following a two-day my for more than two de-
Dow Jones Industrial Av- Federal Open Market Committee meeting in Washington, Wednesday, July 31, 2019. cades. Ultra-low inflation
erage, which had been Associated Press can slow growth by caus-
nearly flat before the an- ing consumers to postpone
nouncement, was off near- which affects many loans to what's become the lon- more than a decade ago, purchases, which, in turn,
ly 300 points about an hour for households and busi- gest expansion on record. the economy is now solid slows consumer spending,
later just as Chairman Je- nesses — by a quarter-point In addition to its rate cut, by most measures, if not the economy's main fuel.
rome Powell was holding a to a range of 2% to 2.25%. the Fed also said it would spectacular. Consumers Another source of pressure
news conference. Investors It's the first rate cut since stop shrinking its enormous are spending. Unemploy- for the Fed has been a re-
appeared disappointed December 2008 during the bond portfolio in August, ment is close to a half-cen- lentless series of public at-
that Powell declined to depths of the Great Reces- two months earlier than tury low. A recession hardly tacks by Trump over its rate
say that the Fed envisions sion, when the Fed slashed planned. This step is intend- seems imminent. policy under Powell. Trump
multiple rate cuts to follow its rate to a record low near ed to avoid putting upward Yet the Fed under Pow- has blamed the Fed's four
Wednesday's. zero and kept it there until pressure on long-term bor- ell has signaled that rising rate hikes in 2018 as a key
The central bank reduced 2015. The economy is far rowing rates. The Fed had economic pressures, nota- reason why the U.S. econo-
its benchmark rate — healthier now despite risks aggressively bought Trea- bly from Trump's trade wars my is slowing.
sury and mortgage bonds and from weakness in Eu- This week, the president
after the financial crisis to rope, Asia and elsewhere, said he wanted to see a
drive down long-term rates have become cause for "large cut" in rates as well
but had been gradually concern. So has an infla- as an immediate halt in the
shrinking its balance sheet tion rate that remains stub- reduction of the Fed's bond
as the economy strength- bornly below the Fed's 2 holdings, to avoid putting
ened. The Fed's action percent target level. upward pressure on long-
Wednesday was approved So the Fed has decided term rates.
8-2 vote, with two dissents: that a rate cut now — and Powell has asserted that
Esther George, president possibly one or more ad- Trump's pressure has had
of the Fed's Kansas City ditional cuts to follow — no effect on the rate poli-
regional bank, and Eric could provide a kind of cies of the Fed, which is
Rosengren, head of the insurance policy against considered an indepen-
Boston Fed, wanted to an economic downturn. dent agency. But the
keep rates unchanged. The idea is that lowering its president's incessant criti-
It was the first time there key short-term rate could cism raises the question of
have been as many as two encourage borrowing and whether the attacks could
dissents since December spending and energize eventually undermine con-
2017 and suggested that growth. Wall Street has wel- fidence that the Fed will
Powell may face opposi- comed that prospect with remain politically indepen-
tion if he seeks further rate a stock market rally since dent and not try to boost
cuts this year. the start of the year. the economy before next
Compared with when the A key concern expressed year's presidential election.
Fed previously cut rates by the Powell Fed is that q