The US Federal Reserve on Wednesday cut short-term interest rates for a third time this year to try to support the economy, but it signaled that it plans no further cuts unless it sees clear evidence that the economic outlook has worsened.
For now, Fed Chairman Jerome Powell sounded a bullish note about the economy in a news conference after the Fed’s latest policy meeting.
Despite some signs of weakness, the Fed expects growth to continue and the job market to remain strong.
Photo: AFP
Since spring, manufacturing output has stumbled amid trade tensions and slower global growth, while US businesses have cut spending on large equipment.
However, Powell said that the Fed does not see those trends weakening the broader economy.
Instead, steady hiring is keeping unemployment very low, boosting consumer confidence, and encouraging more spending.
“Monetary policy is in a good place,” Powell said. “If developments emerge that cause a material reassessment of our outlook we would respond accordingly. Policy is not on a preset course.”
Some of the global and trade threats that have been bedeviling the economy have receded, thereby reducing the need for future rate cuts, Powell said.
The US and China have reached a tentative truce that has cooled their trade dispute, and the EU has agreed to extend the deadline for the UK’s exit from yesterday to Jan. 31, lowering the likelihood of an economically disorderly “no deal” Brexit.
“On both, the risks appear to have subsided,” Powell said. “That could bode well for business confidence and activity over time.”
Analysts said the year’s third rate cut had been widely expected and that expectations for another cut at the Fed’s next meeting next month, were already dim.
The Fed’s move reduces the short-term rate it controls — which influences many consumer and business loans — to a range between 1.5 percent and 1.75 percent.
The policymakers dropped from their statement a key phrase they had used since June to indicate that a future rate cut was likely. That phrase said they would “act as appropriate to sustain the expansion.”
The Fed’s new statement says instead that it will review the latest economic data as “it assesses the appropriate path” for its benchmark interest rate.
Two of the Fed’s policymakers dissented from the decision: Boston Fed President Eric Rosengren and Kansas City Fed President Esther George said they preferred to leave rates alone.
Both have dissented from all three rate cuts this year.
Earlier on Wednesday, the US government estimated that the economy grew at a tepid, but steady 1.9 percent annual rate during the July-September quarter.
That report showed that businesses cut back on their investment in new equipment and buildings by the most in nearly four years, but it also showed that the housing market helped drive growth for the first time in seven quarters, as home purchases and renovations increased.
Powell credited the Fed’s interest rate cuts for spurring those gains, along with greater spending on vehicles and appliances.
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