Gabriella Demczuk/The New York Times
Federal Reserve Board Chairman Jerome Powell testifies during the Financial Services on Monetary Policy and Economy hearing at the House Financial Services Committee, in Washington, July 10, 2019. The Federal Reserve is almost universally expected to cut interest rates when its meeting wraps up on July 31, the first reduction since officials slashed them to near zero in 2008, during the dark days of the financial crisis.
c.2019 New York Times News Service
WASHINGTON — The Federal Reserve cut interest rates for the first time in more than a decade Wednesday as it attempted to guard the record-long economic expansion against mounting global risks.
The widely expected quarter-point move, the Fed’s first since it cut rates to near zero in 2008, is meant to protect the economy against the potentially harmful effects of a growth slowdown in China and Europe and uncertainty from President Donald Trump’s trade war.
“In light of the implications of global developments for the economic outlook as well as muted inflation pressures, the committee decided to lower the target range for the federal funds rate,” according to the Federal Open Market Committee’s policy statement.
But the Fed did not indicate that this was the beginning of a rate-cutting campaign, suggesting instead that the cut was a minor adjustment intended to help the economy weather any challenges from slowing global growth and Trump’s trade fights.
While Jerome Powell, the Fed chair, left the door open to additional rate moves if the economy showed signs of sputtering, he did not indicate the central bank was poised to engage in the sort of deep cutting cycle that the Fed has done in the past to avert or offset recessions.
“It’s not the beginning of a long series of rate cuts — I didn’t say it’s just one,” Powell said at a news conference following the Fed’s two-day policy meeting. “What we’re seeing is that it’s appropriate to adjust policy to a somewhat more accommodative stance over time, and that’s how we’re looking at it.”
The Fed dropped its target rate to a range between 2% to 2.25%. Officials also announced an early end to the Fed’s efforts to shrink its balance sheet, another attempt to keep the economy moving. The central bank’s holdings of government-backed bonds swelled during the financial crisis as it bought assets to try to reinvigorate growth. Policymakers have been slowly siphoning off securities to return their balance sheet to a more normal size, and that process was slated to end in September. It will now conclude Thursday.
While Fed officials said they expect economic expansion to continue and the labor market to remain strong, “uncertainties about this outlook remain.”
