The Federal Reserve looks poised to cut interest rates for a second time on Wednesday, Sept. 18, to help extend economic expansion in the face of global weakness, President Donald Trump’s trade war with China, and geopolitical risks such as the attacks on Saudi Arabia’s oil facilities, according to AP.
The modest rate cut the Fed announced in July—its first in more than a decade—left its benchmark short-term rate in a range of 2% to 2.25%. It also raised expectations that it would follow with up to three additional quarter-point rate cuts this year.
While the Fed is expected to cut the rate for second time in a decade, Fed Chairman Jerome Powell is not likely to send the message markets want to hear on future rate cuts plans.
“Economists said it’s unlikely the Fed forecast will include more than one more rate cut in its outlook for this year, presented on a chart, known as the “dot plot.” Many in the markets are looking for two more cuts this year,” CNBC reported.
At a news conference Powell will hold Wednesday, he will likely be asked about the risks facing the economy, including the attacks on Saudi oil production facilities, which sent oil prices surging and could raise inflation expectations.
The Fed is also monitoring the global slowdown, especially in Europe, and Britain’s effort to leave the European Union. A disruptive Brexit could destabilize not just Europe but the U.S. economy.
U.S. inflation, which has long been dormant, has begun to show signs that it is reaching the Fed’s 2 percent target and might remain there. If the Fed’s policymakers conclude that inflation will sustain a faster pace, it might give them pause about cutting rates much further, AP reported.
President Trump has repeatedly criticized the Fed for its policy on rates, urging the Fed to cut rates further to boost the economy. In his most recent tweet regarding the Fed on Sept. 12, the president blasted the Fed just “sits, and sits, and sits” in response to European Central Bank rates cut.
“European Central Bank, acting quickly, Cuts Rates 10 Basis Points. They are trying, and succeeding, in depreciating the Euro against the VERY strong Dollar, hurting U.S. exports…. And the Fed sits, and sits, and sits. They get paid to borrow money, while we are paying interest!” the president tweeted.
European Central Bank, acting quickly, Cuts Rates 10 Basis Points. They are trying, and succeeding, in depreciating the Euro against the VERY strong Dollar, hurting U.S. exports…. And the Fed sits, and sits, and sits. They get paid to borrow money, while we are paying interest!
— Donald J. Trump (@realDonaldTrump) September 12, 2019
Includes reporting from The Associate Press