A divided Fed reduces rates but may not cut again this year
WASHINGTON (AP) — A sharply divided Federal Reserve cut its benchmark interest rate Wednesday for a second time this year but declined to signal that further rate cuts are likely this year.
The Fed’s move reduced its key short-term rate — which influences many consumer and business loans — by an additional quarter-point to a range of 1.75% to 2%.
The action was approved 7-3, with two officials preferring to keep rates unchanged and one arguing for a bigger half-point cut. The divisions on the policy committee underscored the challenges for Chairman Jerome Powell in guiding the Fed at a time of high economic uncertainty.
The Fed did leave the door open to additional rate cuts — if, as Powell suggested at a news conference, the economy weakens. For now, he suggested, the economic expansion appears durable in its 11th year, with a still-solid job market and steady consumer spending.
At the same time, 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 noted in its statement that business investment and exports have weakened.
Financial markets closed mostly higher after the Fed’s afternoon announcement although the diverging opinions on the Fed left some investors uncertain how many more rate cuts the Fed will deliver.
The Dow Jones Industrial Average after being down most of the day finished up 36.28 points, or 0.1%, to 27,147.08.
At his news conference, Powell acknowledged that Fed officials are sharply divided about the wisest course for interest rates, especially given uncertainties, like trade conflicts, whose outcomes are out of the Fed’s control.
“This is a time of difficult judgments and disparate perspectives,” the chairman said.
In any case, many business leaders are skeptical that the Fed’s slight rate cuts will deliver much economic benefit.