Federal Reserve Cuts US Interest Rate Amid Weak Exports, Trade Uncertainty

Federal Reserve Cuts US Interest Rate Amid Weak Exports, Trade Uncertainty

The United States' benchmark interest rate will decrease by 25 basis points to a range of 1.75 percent to 2 percent, the US Federal Reserve's policy-setting Federal Open Market Committee said in a statement

WASHINGTON (Pakistan Point News / Sputnik - 19th September, 2019) The United States' benchmark interest rate will decrease by 25 basis points to a range of 1.75 percent to 2 percent, the US Federal Reserve's policy-setting Federal Open Market Committee said in a statement.

"Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability," the statement said on Wednesday. "In light of the implications of global developments for the economic outlook as well as muted inflation pressures, the Committee decided to lower the target range for the federal funds rate to 1-3/4 to 2 percent."

The Fed committee pointed to weak exports and trade uncertainty as drivers behind the decision. Federal Reserve Chairman Jerome Powell, during a press briefing after the announcement, underscored these critical issues.

"Business investment and exports have weakened amid falling manufacturing output. The main reasons appear to be slower growth abroad and trade policy developments," Powell told reporters. "Trade policy tensions have waxed and waned, and elevated uncertainty is weighing on US investment and exports."

Powell also mentioned the imposition of additional tariffs as another factor driving the decision to lower the interest rate.

Powell emphasized, however, that the Fed cannot provide a "settled roadmap for international trade" sought by businesses. The Fed plays no role in trade policy, which he said is up to Congress and the Trump administration.

The Fed chairman indicated that central bank policy is focused on offsetting, to the degree possible, the impact of tit-for-tat tariff increases by the US, China, the European Union and other American trading partners.

The reduction fell short of demands by President Donald Trump, who earlier this month called on the Fed to match rate cuts by US trading partners such as the European Union and China.

Trump in a tweet after the decision said the Fed failed again and called Powell a "terrible communicator."

Trump has repeatedly said that his trade war is having no impact on the US economy and blamed Fed reluctance to aggressively push down rates as the primary reason for slowing growth.

Overall, the US economy continues to perform well, with strong consumer spending, low unemployment and low inflation in the 11th year of an economic expansion, Powell said. The most likely scenario is for a 2019 growth rate above 2 percent. The US economy grew 3 percent in 2018.