Fed Cuts Rates By Quarter Point, But Faces Growing Split

Daniel Fowler
September 20, 2019

President Donald Trump blasted the Federal Reserve Chair Jerome Powell as a "terrible communicator", after the USA central bank's rate cut was less generous than what Trump wanted.

Citing the global economic outlook and "muted" inflationary pressures at home, the central bank chose to lower interest rates a quarter of a point to meet a target borrowing rate of 1.75% to 2%.

However, President Trump, . who has been pressuring the Fed to take more sweeping cuts. slammed the decision, . saying Fed Chairman Jerome Powell and other Fed policymakers had again failed to meet his expectations. No 'guts, ' no sense.

The president has repeatedly attacked the Fed since mid-2018, demanding lower rates to help boost economic growth.

Richard Carter, of investment manager Quilter Cheviot, said: 'Trump would like them to have done more but the USA economy remains in fairly good shape and there is no sign of an imminent recession'.

I reckon that is more suggestive of potentially one more rate cut if conditions allow for it. We still view at least one or two more cuts over the next year as the most likely outcome.

Trump wasted no time in slamming the Fed on Twitter - continuing his relentless campaign to pressure the central bank to provide additional stimulus to the economy.

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In its statement on monetary policy, the Japanese bank said "it is becoming necessary to pay closer attention to the possibility that the momentum toward achieving the price stability target will be lost", in reference to the BOJ's ever elusive 2% inflation target.

At a press conference following the Fed announcement, Powell was asked if Trump's criticisms were hurting morale at the central bank.

Federal Reserve Chair Jerome Powell acknowledges that officials at the USA central bank are fractured about next steps on interest rates. Those forecasts are well below the Trump administration's projection that the president's policies will accelerate growth to 3 percent annually or better.

The job market looks solid, wages are rising, consumers are still spending and even such sluggish sectors as manufacturing and construction have shown signs of rebounding. Dollar appreciation hurts US exports, which the Fed cited as one of the main drags on the USA economy now. Benchmark U.S. crude fell gained 11 cents to $58.22 per barrel in electronic trading on the New York Mercantile Exchange.

United States inflation, which has always been dormant, has begun to show signs that it is reaching the Fed's 2 per cent target and might remain there.

In recent days, the Trump administration and Beijing have acted to de-escalate tensions before a new round of trade talks planned for October in Washington. If the Fed's policymakers conclude that inflation will sustain a faster pace, it might give them pause about cutting rates much further. Yet most analysts foresee no significant agreement emerging this fall in the conflict, which is fundamentally over Beijing's aggressive drive to supplant America's technological dominance.

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