Sep 18, 2019

Federal Reserve announces 2nd consecutive rate cut

Fed chairman Jerome Powell. Photo: Mark Wilson via Getty Images

The Federal Reserve cut interest rates by a quarter point on Wednesday, bringing the target range for the benchmark Fed Funds rate to 1.75%–2%.

Why it matters: The Fed's 2nd consecutive rate cut reflects worries about the U.S. economy. The trade war and slowing growth around the world have made corporate executives more worried than they've been in years.

  • The move prompted a near-immediate response from President Trump, who called chair Powell a "terrible communicator." The president has demanded in a series of tweets that the Fed cut interest rates more aggressively.

The big picture: Speaking at a press conference, Powell again cited the trade war as a key risk to the economic outlook. "Our business contacts around the country have been telling us that uncertainty about trade policy has discouraged them from investing in their businesses," Powell said.

  • Still, new projections showed a division among Fed officials about whether more rate cuts are warranted this year.
  • Powell did note that if "the economy does turn down, then a more extensive sequence of rate cuts could be appropriate."

Powell also acknowledged the liquidity shortfall in money markets that has forced the Fed to intervene — something that before this week hadn't happened since the financial crisis.

  • In response to the drama in the short-term funding markets, Powell suggested that the Fed may increase the size of its balance sheet through "organic growth" earlier than expected.

Go deeper

The Fed's September rate cut now looks even more controversial

Fed chairman Jerome Powell.

Minutes from the Fed's September policy meeting were released Wednesday, showing there was likely more opposition to its rate cut than just the 2 dissenting votes that were cast.

Details: The minutes showed debate had grown about when the Fed should stop cutting rates and "several members" wanted to keep rates on hold.

Go deeperArrowOct 10, 2019

There's nothing new about Fed disagreement

Reproduced from Federal Reserve Bank of St. Louis; Chart: Axios Visuals

Dissent has been growing at the Fed this year and has only increased since Chairman Jerome Powell decided to cut U.S. overnight interest rates in July.

Why it matters: While there are signs the Fed's rate setting committee is a very divided body, the 6 dissenting votes against official FOMC decisions this year are hardly out of the ordinary.

Go deeperArrowSep 23, 2019

The divided Fed is losing investors' faith

Illustration: Aïda Amer/Axios

The Fed is doing its best to prop up the U.S. economy in the face of possible economic turbulence, but it's beginning to look like a rudderless ship and it's fast losing the confidence of investors.

Driving the news: The Fed's rate-setting committee cut U.S. interest rates 25 basis points as expected on Wednesday, but did so with 3 dissenting votes for the first time since 2016.

Go deeperArrowSep 19, 2019