The U.S. central bank has cut its benchmark interest rates for the second time this year.
It’s another signal that while the U.S. economy is, on paper at least, in good shape, there’s growing unease about the future.
And as CGTN’s Owen Fairclough explains, the Federal Reserve appears to be caving to pressure from U.S. President Donald Trump.
A central bank once heading up and up is now with that sinking feeling – cutting interest rates to between 1.75 and 2 percent and hinted there may be another rate cut ahead.
“We took the step to help keep the U.S. economy strong in the face of some notable developments and insurance against ongoing risks,” U.S Federal Reserve Chair Jerome Powell told a news conference after Wednesday’s meeting.
The Fed cut interest rates in July — the first rate cut in more than ten years.
This second one is fueling fears all is not well with an economy where all the indicators are positive, but geopolitical tensions over Brexit, Iran and the ongoing trade war with China are denting confidence.
The Fed is particularly concerned about the impact of President Trump’s tariff battles.
“Trade policy tensions have waxed and waned and elevated uncertainty is weighing on U.S investments and exports,” Powell said.
“Our business contacts around the country are telling us that uncertainty about trade policy has discouraged them from investing in their businesses.”
Trump has pressured Powell to lower interest rates to accelerate economic growth, but even this rate cut wasn’t enough: even before Powell had started his news conference, Trump tweeted “Jay Powell and the Federal Reserve fail again.”
The U.S. isn’t alone in cutting rates.
The European Central Bank is so concerned about the Eurozone’s outlook that last week it slashed interest rates to less than zero and said it’ll resume stimulus measures – as part of a renewed push to boost economic activity.
Joe Minarik discusses latest US Federal Reserve interest rate cut
CGTN’s Wang Guan spoke with Joe Minarik, vice president and director of Research for the Committee for Economic Development, about the last interest rate decision from the U.S. Federal Reserve.