The Federal Reserve is expected to cut its key interest rate on Wednesday, July 31, to deal with what it sees as threats to the U.S. economy that it might face.
This will be the first rate cut since December 2008 during the financial crisis.
AP reported, “Most analysts expect the Fed to announce a quarter-point cut in its benchmark short-term rate. That rate, which affects many consumer and business loans, is now in a range of 2.25% to 2.5% after nine quarter-point rate increases from December 2015 to December 2018.”
Under Chairman Jerome Powell, the Fed has faced pressure to ease credit since it raised its key rate in December for the fourth time in 2018 and hinted that additional rate increases were likely this year, according to AP.
Stock prices were down as a result and the Fed received criticism, notably from President Trump, that it was tightening credit too much and threatening the economy.
President Trump has criticized the Fed over the past year, blaming the four rate hikes in 2018 as a major reason why the economy is slowing.
“The Fed moved, in my opinion, far too early and far too severely. It puts me at a—somewhat of a disadvantage. Fortunately, I’ve made the economy so strong that nothing is going to stop us. But the Fed could have made it a lot easier,” the president said in the most recent interview at the White House on Tuesday.
The president also said he is disappointed in the Fed, saying, “I’m very disappointed in the Fed. I think they acted too quickly by far.”
“I also think that had they not done it—as good as we’ve done, we’ve set a record, as you will tell, as you will say, in the stock market. We have the all-time high in the history of the stock market. I think I would have been 10,000 points higher and I think we would have been in the 4s with GDP,” the president said.
When asked if a quarter-point rate cut from the Fed is enough, the president said, “I would like to see a large cut.”
President Trump always supports rate cuts. Early this month he said, “If we had a Fed that would lower interest rates, we would be like a rocket ship.”
According to CNBC, former Fed chair, Janet Yellen said that she supports a 25-basis-point cut in the central bank’s benchmark interest rate, saying “The global economy has weakened. I think partly it’s weakened because of conflicts over trade and the uncertainty that’s caused for businesses.”
“The United States isn’t an island.” “We’re part of the global economy. What happens in the rest of the world—in Europe, in Asia—affects the United States. And it’s also true that U.S. monetary policy affects conditions all around the globe,” Yellen added.