FEDERAL RESERVE CUTS RATES - HIGHER FUEL PRICES $C
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Posted On: 07/31/2019 2:36:31 PM
FEDERAL RESERVE CUTS RATES - HIGHER FUEL PRICES $CHK
Fed Cuts Interest Rates for First Time Since 2008 Crisis
ImageThe Federal Reserve cut interest rates for the first time since 2008 as it tried to keep the economic expansion from petering out.
The Federal Reserve cut interest rates for the first time since 2008 as it tried to keep the economic expansion from petering out.CreditCreditLexey Swall for The New York Times
By Jeanna Smialek
July 31, 2019
27
WASHINGTON — The Federal Reserve cut interest rates for the first time in more than a decade, an effort to guard the record-long economic expansion against mounting global risks.
The widely expected quarter-point move, the Fed’s first since it cut rates to near zero in 2008, is meant to protect the economy against the potentially harmful effects of a growth slowdown in China and Europe and uncertainty from President Trump’s trade war.
“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,” according to the Federal Open Market Committee’s policy statement.
Why the Federal Reserve Cut Interest Rates for the First Time Since the Crisis
The move is what’s called an “insurance cut” — one that central bankers are making to keep growth chugging along.
The Fed also announced an early end to its efforts to shrink its balance sheet, another attempt to keep the economy moving. The central bank’s holdings of government-backed bonds swelled during the financial crisis as it bought assets to try to reinvigorate growth. Policymakers have been slowly siphoning off securities to return their balance sheet to a more normal size, and that process was slated to end in September. It will now conclude Aug. 1.
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Both Eric Rosengren, the president of the Federal Reserve Bank of Boston, and Esther George, the president of the Federal Reserve Bank of Kansas City, voted against Wednesday’s decision, preferring instead to leave rates unchanged. Those dissents marked the second and third of Jerome H. Powell’s term as chair.
While Fed officials said they expect economic expansion to continue and the labor market to remain strong “uncertainties about this outlook remain.”
Officials did not indicate whether this cut would be followed by additional moves. The Fed’s June economic projections suggest policymakers envision cutting rates slightly to shore up the economy, rather than beginning an easing cycle that will return rates to zero.
“As the committee contemplates the future path of the target range for the federal funds rate, it will continue to monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion,” the Fed said in its statement, seemingly leaving its options open.
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The widely expected move was largely greeted with a shrug in financial markets, where investors have been factoring in a quarter-point rate cut for weeks. The S&P 500, which had been roughly flat before the 2 p.m. decision, briefly slumped, but then clawed back those losses. Shortly before 2:15 p.m., the benchmark index was basically unchanged. Likewise, yields on Treasury bonds were largely unchanged a few minutes after the announcement, with the 10-year Treasury note yielding 2.02 percent.
The Fed’s rate cut carries political risks, given Mr. Trump’s attacks on the central bank. Mr. Trump has been denouncing the Fed in speeches and on Twitter for the past year, criticizing its four 2018 rate increases and blaming its policies for slowing the American economy. Some onlookers may see Wednesday’s move as caving to the president.
The Fed operates independently of the White House. It attributed the change, which officials have been signaling for months and which investors fully expected, to growing economic concerns.
Mr. Powell will speak at a 2:30 p.m. news conference, and could provide further details into both the Fed’s rationale and its outlook.
The central bank is trying to extend a record-long economic expansion, because officials believe that doing so will allow the Fed to achieve its goals of maximum employment and slow but steady inflation. The unemployment rate is hovering around its lowest level in 50 years, but that has yet to push wages dramatically higher in a way that forces companies to lift prices more quickly.
Inflation has run shy of the Fed’s 2 percent goal since the central bank formally adopted it in 2012. A little inflation helps to grease the wheels of a healthy economy, allowing businesses to raise wages faster and lifting interest rates, giving the central bank more room to cut in the event of a downturn.
Prices picked up just 1.6 percent in the year through June, not counting volatile food and fuel costs.
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Wages are growing only moderately. An index of employment costs climbed by 2.7 percent in the second quarter from a year earlier, less than expected and a slowdown from earlier in 2019, according to data released on Wednesday.
Global policy uncertainty has also increased, and manufacturing is slumping the world over. Growth is slowing in China and Europe, and Mr. Trump’s trade war with China and threats of further tariffs on United States trading partners are stoking uncertainty and causing businesses to hold off on investment.
Those developments threaten the economic outlook, even as growth remains solid, consumer spending is robust and the job market holds up for now.
https://www.nytimes.com/2019/07/31/business/e...collection
Fed Cuts Interest Rates for First Time Since 2008 Crisis
ImageThe Federal Reserve cut interest rates for the first time since 2008 as it tried to keep the economic expansion from petering out.
The Federal Reserve cut interest rates for the first time since 2008 as it tried to keep the economic expansion from petering out.CreditCreditLexey Swall for The New York Times
By Jeanna Smialek
July 31, 2019
27
WASHINGTON — The Federal Reserve cut interest rates for the first time in more than a decade, an effort to guard the record-long economic expansion against mounting global risks.
The widely expected quarter-point move, the Fed’s first since it cut rates to near zero in 2008, is meant to protect the economy against the potentially harmful effects of a growth slowdown in China and Europe and uncertainty from President Trump’s trade war.
“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,” according to the Federal Open Market Committee’s policy statement.
Why the Federal Reserve Cut Interest Rates for the First Time Since the Crisis
The move is what’s called an “insurance cut” — one that central bankers are making to keep growth chugging along.
The Fed also announced an early end to its efforts to shrink its balance sheet, another attempt to keep the economy moving. The central bank’s holdings of government-backed bonds swelled during the financial crisis as it bought assets to try to reinvigorate growth. Policymakers have been slowly siphoning off securities to return their balance sheet to a more normal size, and that process was slated to end in September. It will now conclude Aug. 1.
ADVERTISEMENT
Both Eric Rosengren, the president of the Federal Reserve Bank of Boston, and Esther George, the president of the Federal Reserve Bank of Kansas City, voted against Wednesday’s decision, preferring instead to leave rates unchanged. Those dissents marked the second and third of Jerome H. Powell’s term as chair.
While Fed officials said they expect economic expansion to continue and the labor market to remain strong “uncertainties about this outlook remain.”
Officials did not indicate whether this cut would be followed by additional moves. The Fed’s June economic projections suggest policymakers envision cutting rates slightly to shore up the economy, rather than beginning an easing cycle that will return rates to zero.
“As the committee contemplates the future path of the target range for the federal funds rate, it will continue to monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion,” the Fed said in its statement, seemingly leaving its options open.
Editors’ Picks
The $60 Gadget That’s Changing Electronic Music
Triceratops Skull, 65 Million Years Old, Unearthed by College Student, 23
For Years, Alcohol Was My Only Comfort. Then It Nearly Killed Me.
ADVERTISEMENT
The widely expected move was largely greeted with a shrug in financial markets, where investors have been factoring in a quarter-point rate cut for weeks. The S&P 500, which had been roughly flat before the 2 p.m. decision, briefly slumped, but then clawed back those losses. Shortly before 2:15 p.m., the benchmark index was basically unchanged. Likewise, yields on Treasury bonds were largely unchanged a few minutes after the announcement, with the 10-year Treasury note yielding 2.02 percent.
The Fed’s rate cut carries political risks, given Mr. Trump’s attacks on the central bank. Mr. Trump has been denouncing the Fed in speeches and on Twitter for the past year, criticizing its four 2018 rate increases and blaming its policies for slowing the American economy. Some onlookers may see Wednesday’s move as caving to the president.
The Fed operates independently of the White House. It attributed the change, which officials have been signaling for months and which investors fully expected, to growing economic concerns.
Mr. Powell will speak at a 2:30 p.m. news conference, and could provide further details into both the Fed’s rationale and its outlook.
The central bank is trying to extend a record-long economic expansion, because officials believe that doing so will allow the Fed to achieve its goals of maximum employment and slow but steady inflation. The unemployment rate is hovering around its lowest level in 50 years, but that has yet to push wages dramatically higher in a way that forces companies to lift prices more quickly.
Inflation has run shy of the Fed’s 2 percent goal since the central bank formally adopted it in 2012. A little inflation helps to grease the wheels of a healthy economy, allowing businesses to raise wages faster and lifting interest rates, giving the central bank more room to cut in the event of a downturn.
Prices picked up just 1.6 percent in the year through June, not counting volatile food and fuel costs.
Subscribe to With Interest
Catch up and prep for the week ahead with this newsletter of the most important business insights, delivered Sundays.
SIGN UP
ADVERTISEMENT
Wages are growing only moderately. An index of employment costs climbed by 2.7 percent in the second quarter from a year earlier, less than expected and a slowdown from earlier in 2019, according to data released on Wednesday.
Global policy uncertainty has also increased, and manufacturing is slumping the world over. Growth is slowing in China and Europe, and Mr. Trump’s trade war with China and threats of further tariffs on United States trading partners are stoking uncertainty and causing businesses to hold off on investment.
Those developments threaten the economic outlook, even as growth remains solid, consumer spending is robust and the job market holds up for now.
https://www.nytimes.com/2019/07/31/business/e...collection
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