WASHINGTON (AP) — The Latest on the Federal Reserve’s monetary policy meeting:
BREAKING: The Federal Reserve cuts rates for a second time this year with promise to "act as appropriate" to sustain economic expansion. The Fed's move will reduce its benchmark rate by an additional quarter-point to a range of 1.75% to 2%. https://t.co/jc3DOGsWcX
— The Associated Press (@AP) September 18, 2019
Stocks dropped after the Fed didn't provide investors with concrete clues about what the future holds. The Dow Jones Industrial Average went from a loss of 58 points just before the cut was announced to a loss of 166 points at 2:25 p.m.
The market expected the quarter-point cut to the federal funds rate, which influences many consumer and business loans. But three of the 10 voting officials dissented from the decision, and the Fed looks divided on what to do next. That ambiguity may have displeased investors on Wall Street.
President Donald J. Trump was not happy with the decision.
Jay Powell and the Federal Reserve Fail Again. No “guts,” no sense, no vision! A terrible communicator!
— Donald J. Trump (@realDonaldTrump) September 18, 2019
The president has wanted the federal funds rate to be near-zero, rather than the range of 1.75% to 2% set by the Fed. Trump has remarked that other countries such as Germany have an advantage because their interest rates are negative, even though negative rates are a sign that those economies are in a recession and may struggle to grow in the longer term.
Forecasts show that seven out of 17 officials favor an additional rate cut this year that would put the federal funds rate at a range of 1.5% to 1.75%. But the outlook becomes hazier in 2020 as at least two officials expect a rate hike.
No one anticipates rates to fall below 1.5% in 2020, a sign that the current turbulence from a global slowdown and Trump's escalation of the trade war with China is viewed as manageable.
The officials' forecast for the U.S. economy barely changed from the previous predictions in June. The economy is expected at the median to grow 2.2% this year, up from the earlier forecast of 2.1%. Unemployment is projected to be 3.7%, slightly higher than the 3.6% rate in the previous forecast. Inflation is anticipated to be 1.5%, which is below the U.S. central bank's target of 2%.
The economy appears durable in its 11th year of growth, with a still-solid job market and steady consumer spending. But the Fed is trying to combat threats including uncertainties caused by the trade war with China, slower global growth and a slump in American manufacturing.
The Fed notes in its statement that "business fixed investment and exports have weakened."