Fed signals interest rate cuts possible later this year

Fed signals interest rate cuts possible later this year
  • Clock-gray 23:40
  • calendar-gray 19 June 2019

The U.S. Federal Reserve on Wednesday signaled it could cut interest rates by as much as half a percentage point over the remainder of this year, as it responded to increased economic uncertainty and a drop in expected inflation, APAreports quoting Reuters.

The Fed, which held rates steady after the end of its latest two-day policy meeting, said it “will act as appropriate to sustain” a nearly 10-year economic expansion and dropped a promise to be “patient” in adjusting rates. Nearly half its policymakers now show a willingness to lower borrowing costs over the next six months.

Even policymakers who did not write down a forecast for a rate cut this year believe “that the case for somewhat more accommodative policy has strengthened,” Fed Chairman Jerome Powell said in a news conference following the meeting.

The baseline outlook remains “favorable,” he said, and “there was not much support for cutting rates now at this meeting.” But, he added, there will be plenty of incoming data in the near term that will help policymakers figure out if the risks of a less favorable outcome continue to rise.

That was not enough to change the median outlook for the Fed’s targeted overnight lending rate, which officials projected to remain in a range of between 2.25% and 2.50% for the rest of this year.

But it still represented a significant shifting of views on the Fed. Only one policymaker continues to see a rate hike as likely in 2019.

The long-run federal funds rate, a barometer for the state of the economy over the long term, was cut to 2.50% from 2.80%.

St. Louis Fed President James Bullard, who had argued that rates should be cut, dissented in Wednesday’s policy decision.

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