The Federal Reserve (Fed) decided to lower interest rates on Wednesday, Sept. 18, to help provide insurance for U.S. economy against ongoing risks, but the cut was small, inciting a sharp rebuke from President Donald Trump.
After a two-day policy meeting, the Fed announced it would reduce the benchmark overnight lending rate by 0.25 percentage point to a target range of 1.75% to 2.00%, CNBC reported.
This is the second rate cut this year after the previous reduction with the same amount announced in July, which was also the first cut in 11 years.
In addition, the Fed decided to cut the interest it pays on excess reserves by 30 basis points, greater than the funds rate cut, amid a breakdown in the overnight repurchase lending market this week.
However, the rate cut decision on Wednesday showed division within the policymaking Federal Open Market Committee (FOMC) as three among the 10 voting members voted no. Esther George of Kansas City and Eric Rosengren of Boston called for no rate cut, and James Bullard of St. Louis wanted a bigger cut of 0.5 percentage points.
President Trump blasted the central bank’s decision and its chairman, saying in a tweet, “Jay Powell and the Federal Reserve Fail Again.”
“No “guts,” no sense, no vision! A terrible communicator!” the president tweet.
Jay Powell and the Federal Reserve Fail Again. No “guts,” no sense, no vision! A terrible communicator!
— Donald J. Trump (@realDonaldTrump) September 18, 2019
President Trump’s tweet came even before Powell had begun his news conference on the rate cut, according to Reuters.
The president has frequently criticized that the Fed “fails to act,” arguing that it “does nothing” or only “sits, and sits, and sits” in an environment of low inflation and though other central banks around the world are cutting rates, making the U.S. dollar “Strongest ever! Really bad for exports.”
In their latest projections for the economy, FOMC’s policymakers forecast inflation would be 1.5% for 2019, below its 2% target, before rising to 1.9% next year.
In a press conference after the meeting, Powell described the U.S. economic outlook as “favorable,” and the rate cut was “to provide insurance against ongoing risks,” including weak global growth and resurgent trade tensions.
The Fed chairman said a more extensive sequence of rate cuts could be appropriate “if the economy does turn down.”
FOMC now sees the U.S. GDP rising at 2.2% this year, slightly higher than a 2.1% rate projected in June, and expects the unemployment rate at 3.7% through 2020.