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Fed delivers first rate cut since financial crisis

Credit: Reuters Studio
Published on July 31, 2019 - Duration: 02:00s

Fed delivers first rate cut since financial crisis

The Federal Reserve delivered a quarter-percentage point rate cut, the central bank's first rate ease since the financial crisis more than 10 years ago but Fed Chief Jerome Powell declined whether to say the cut is one and done or if there are more cuts to come.

Conway G.

Gittens reports.

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Fed delivers first rate cut since financial crisis

For the first time since the financial crisis more than a decade ago - the Federal Reserve delivered a rate cut - Wednesday.

The U.S. economy has come a long way since those dark days: consumer spending and hiring is up, while unemployment is down.

So why a quarter-point rate cut now?

Fed Chairman Jerome Powell explained it this way.

The outlook is good but... (SOUNDBITE) (English) FEDERAL RESERVE CHAIRMAN JEROME POWELL, SAYING: "What we've been monitoring since the beginning of the year is effectively downside risks to that outlook from weakening global growth and we see that everywhere, weak manufacturing, weak global growth now particularly in European Union and China.

In addition, we see trade policy developments, which at times have been disruptive and then have been less so, and also inflation running below target.

So we see those as threats to what is clearly a favorable outlook." The cut designed to keep the longest economic expansion ever - intact.

The downward push in the Fed's key lending rate to a target of 2 to 2-1/4 percent was not as big as President Trump strongly urged.

(SOUNDBITE) (English) U.S. PRESIDENT DONALD TRUMP, SAYING: "I would like to see a large cut." But Powell did do something Trump wanted - in an effort to prime the pump - he will stop selling bonds bought to prop up the economy during the financial crisis.

Given that other central banks are lowering rates to provide stimulus to their faltering economies, Wall Street is expecting even lower rates in the U.S. But Powell didn't want to be tied down, wanting to retain flexibility.

(SOUNDBITE) (English) FEDERAL RESERVE CHAIRMAN JEROME POWELL, SAYING: "Let me be clear, what I said was it is not the beginning of a long series of rate cuts.

I didn't say it's just one or anything like that what I said is when you think about rate cutting cycles they go on for a long time but the committee is not seeing that." That caught Wall Street off guard -sparking a Wall Street sell-off.

The Dow fell more than 300 points by session's end.

Financial markets are now betting on just one more rate cut before the year is out.

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