The Federal Reserve has reduced interest rates for the first time since the financial crisis and hinted it may cut again this year to insulate the record-long US economic expansion from slowing global growth. Central bankers voted, with two officials dissenting, to lower the target range for the benchmark rate by a quarter-percentage point to 2%-2.25%. The shift was predicted by most investors and economists, yet will disappoint President Donald Trump, who posted on social media on Tuesday that he wanted a “large cut.’’ It also noted that “uncertainties” about the economic outlook remain.
- Officials also stopped shrinking the Fed’s balance sheet effective today, ending a process that very modestly tightens monetary policy and was previously scheduled to come to a close at the end of September.
- Policy makers appeared open to another cut as early as September when they next convene, while sticking with wording in their statement that preserves their options.
- While the domestic economy has performed relatively well, the Fed cut amid concern that softness abroad threatens the decade- long US expansion.
- In the US, after growing 2.5% last year, fueled by now-fading tax cuts and higher government spending, the economy expanded at a 2.1% annualized pace in the second quarter.
- Fellow central banks are set to follow the Fed. Those in India, South Africa and Australia are among those to have cut this year. The European Central Bank has indicated it will do so in September.