Fitch Ratings

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Chairman Jerome Powell voted in favour of The Cut

The US Central Bank has cut interest Rates for only the second time since 2008, amid concerns about slowing global growth and Trade wars.

As expected, the Federal Reserve lowered The Target range for its key interest rate by 25 basis points to between 1. 75% and 2%.

President Trump reacted by attacking Fed chairman Jerome Powell for lacking "guts".

Mr Trump has repeatedly criticised the Fed for cutting Rates too slowly.

The President took to Twitter in The Minutes immediately following the rate cut announcement to lambast The Move : "Jay Powell and the Federal Reserve Fail Again. No "guts," no sense, no vision! A terrible communicator!".

The Bank said The Cut is aimed at shoring up the US economy, amid "uncertainties" about future growth.

Split vote

But officials were divided about the decision and over the need for future cuts.

Seven members of the Federal Reserve Open Markets Committee, which sets the Rates , voted in favour of Wednesday's cut, including Mr Powell.

Two members wanted to hold the rate steady, while one wanted to cut further.

Mr Powell said policymakers decided on a second cut after global growth slowed and Trade tensions worsened over the summer.

"The Thing we can't address really is what businesses would like, which is a settled roadmap for International Trade . . But we do have a very powerful tool which can counteract weakness to some extent," he said, referring to the rate cut.

However, he dismissed the need for negative interest Rates - a proposal backed by Mr Trump - as "not at The Top of The List ".

The comments underscored The Strain between Mr Powell and The President , who has sought to blame the Fed for economic slowdown, while waging Trade wars with China, Europe and others.

Cutting Rates helps fuel economic activity, by Making It cheaper to borrow money for both businesses and consumers.

But with interest Rates in the US already low by historic Standards - and much of the economic uncertainty caused by the Trade war with China - analysts have questioned how much rate cuts will help.

US share markets fell after The Announcement , But later recovered.

Policy shift

The Fed's decision to lower Rates on Wednesday follows a similar cut In July and marks a reversal from its policy only a year ago, when America's healthy economy had convinced policy makers to enact a series of small hikes.

But US Economic Growth slowed to 2% in the second quarter, job creation has slipped and inflation remains lower than US policymakers would like.

In recent days, parts of the financial markets have also shown signs of a cash-crunch, temporarily pushing short-term interest Rates above the Fed's target and prompting The Bank to intervene.

Analysis

By Andrew Walker , BBC economics correspondent

The Cut in interest Rates was of course the headline from this Fed meeting. But The Chairman Jerome Powell also commented on some developments in the US financial system that have really had people scratching their heads This Week .

There was a sharp rise in borrowing costs in a rather arcane corner of the financial system known as the repo (repurchase) market which firms use to raise or lend cash for short periods.

What was going on? Could it be A Warning sign of serious stress somewhere in the financial world? The Crisis a decade ago has made people more sensitive to that kind of possibility.

Mr Powell said it was due to companies needing a lot of cash for tax payments and for investors buying government bonds. Although the Fed and the markets knew these developments were coming, Mr Powell said they "had a bigger effect than most folks anticipated". He said these issues have no implications for the economy. So, flap over? Maybe. Let's hope so.

In economic projections released on Wednesday, Federal Reserve policymakers said they expect the economy to grow 2. 2% this year, faster than they forecast in June.

Brian Coulton, chief economist at Fitch Ratings , said the upgrade to that growth prediction underscores the fact that the Fed is worried about global factors, such as the Trade war, rather than the underlying health of the US economy.

"This move is all about the deterioration in the global economic outlook over the late summer and very little about incoming US data," he said.

"While the Fed has maintained its 'will act as appropriate' language, we still see this as an insurance policy move and don't expect a series of further rate cuts," he added.

us federal reserve, us economy

Source of news: bbc.com