The Federal Reserve has cut U.S. interest rates for the third time in 2019, reports The Guardian. The move comes as an attempt to keep the longest running period of growth in the country’s history continuing into the crucial election year of 2020.
However, this decision put the central bank at odds with President Trump when it signaled to the financial markets that it had no immediate intention of cutting the cost of borrowing further.
The president had put intense pressure on the Fed to boost the world’s biggest economy and his own re-election prospects by making aggressive cuts in the cost of borrowing. However, Jerome Powell, central bank’s chair, said, “there was a limit to what the Fed could do and that a more effective way to stimulate activity would be for Congress to loosen fiscal policy through spending increases or tax cuts.”
Additionally, although the president had boasted about the strength of the economy, growth did slow down in 2019. Paul Ashworth, the chief US economist at Capital Economics, said, “On balance, we still anticipate that a further deterioration in the incoming activity data will persuade the Fed to change tack and cut interest rates one final time in December.”
Rajan Naik, the director of Financial Markets Online, said: “Another Fed rate cut, another masterclass in the long game from Jerome Powell. Despite the surprisingly strong GDP data, the Fed chairman remains unwavering in his desire to keep ahead of the economic curve. Even though he began his press conference with a list of the things that are going right – American consumer spending is in rude health, GDP is holding up well and US workers are basking in the lowest jobless rate for five decades – Mr Powell is keen to see off any economic clouds before they darken the horizon.”
