US Fed Reserve cuts rates for the first time in over a decade

US Fed Reserve cuts rates for the first time in over a decade

The US Federal Reserve cuts interest rates in an effort to extend the country’s historic economic expansion beginning under former President Barack Obama

The US Fed Reserve announced a rate cut of 0.25 per cent, bringing the interest rates from 2.25 to 2 per cent as part of its goal of extending the country’s historic economic expansion that began under former President Barack Obama. While the rate cut came as no surprise to many, it however made headlines across the globe, considering that it is the first time the Fed Reserve is taking such an action in more than 10 years.

The Fed Chair in the person of Jerome Powell has also come out to say that the move might not be the start of a lengthy campaign to shore up the economy against risks including global weakness. “Let me be clear – it’s not the beginning of a long series of rate cuts,” Powell said in a news conference after the Fed Reserve released its latest policy statement. “I didn’t say it’s just one rate cut,” Powell continued.

Some of the factors that influenced the decision of the central bank according to Mr. Powell include signs of a global slowdown, simmering U.S. trade tensions, and a desire to boost too-low inflation.

This is coming after rumors had it that the board was previously considering raising rates in 2019.

According to U.S. President Donald Trump, a strong advocate of big rate cuts, who has continuously attacked the Fed’s policy stance under Powell, the Fed chief “let us down” by not telegraphing that an aggressive easing was coming.

The rate cut is the first since December 2008 during the depths of the Great Recession, which led to the Fed slashing its rate to a record low near zero and kept it there until 2015. However, the economy is a lot healthier now despite risks to what has become the longest expansion on record.

The Fed has repeatedly stated a pledge to “act as appropriate to sustain the expansion,” wording that markets have seen as a signal for possible future rate cuts.

The new rates are also reportedly aimed at combating the extensive uncertainty caused by Donald Trump’s ongoing trade war with China and tariffs threats against several countries.

Stock indexes fell on Wednesday after the widely-expected announcement with the smaller cut prompted investors to send stocks lower and bond yields higher. This is not surprising, considering that some on Wall Street had believed the Fed might act more aggressively in cutting rates by half a percentage point rather than the quarter-point cut it wound up making.

The Federal Reserve’s repeated vow to “sustain the expansion,” has been was widely-interpreted as a signal for possible future rate cuts.

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