Please ensure Javascript is enabled for purposes of website accessibility
Fed Cuts Rates a 3rd Time This Year but Signals Likely Pause
gvw_ap_news
By Associated Press
Published 5 years ago on
October 30, 2019

Share

WASHINGTON — The Federal Reserve cut its benchmark interest rate Wednesday for the third time this year to try to sustain the economic expansion in the face of global threats. But it hinted that it won’t likely cut again this year.
The Fed’s move reduces the short-term rate it controls — which influences many consumer and business loans — to a range between 1.5% and 1.75%.

The third rate cut of the year has partly reversed the four hikes that the Fed made last year in response to a strengthening economy. That was before rising global risks led the Fed to change course and begin easing credit. Lower rates are intended to encourage more borrowing and spending.
A statement the Fed released after its latest policy meeting removed a key phrase that it has used since June to indicate a future rate cut is likely. This could mean that Fed officials will prefer to leave rates alone while they assess how the economy fares in the months ahead.
The economy is in its 11th year of expansion, fueled by consumer spending and a solid if slightly weakened job market. By cutting rates, the Fed has tried to counter uncertainties heightened by President Donald Trump’s trade conflicts, a weaker global economy and a decline in U.S. manufacturing.
The third rate cut of the year has partly reversed the four hikes that the Fed made last year in response to a strengthening economy. That was before rising global risks led the Fed to change course and begin easing credit. Lower rates are intended to encourage more borrowing and spending.
Chairman Jerome Powell has said that the central bank’s rate reductions are intended as a kind of insurance against threats to the economy. Powell has pointed to similar rate cuts in 1995 and 1998 as precedents; in both those cases, the Fed cut rates three times. He and most other Fed officials credit their rate cuts with lowering mortgage rates, boosting home sales and generally keeping the economy on track.

Some International Tensions Have Eased

The Fed is also weighing the consequences of a decline in expectations for inflation. Lower inflation expectations can be self-fulfilling. This can pose a problem for the Fed because its preferred inflation gauge has been stuck below its 2% target for most of the past seven years.
In the meantime, Trump, via Twitter, has renewed his attacks on the Fed for not lowering its benchmark rate closer to zero. The president has contrasted the Fed’s actions unfavorably with central banks in Europe and Japan, which have slashed their rates into negative territory. Though Trump has argued that this puts the United States at a competitive disadvantage, most economists regard negative rates as a sign of weakness.
Some international tensions have eased since the Fed previously met in mid-September, which might suggest to some that further rate cuts are less necessary. The U.S. and China reached a temporary trade truce earlier this month and are working on a preliminary agreement that could be signed soon by Trump and President Xi Jinping. It’s not clear, though, how meaningful such an agreement might be, and Trump hasn’t dropped his threat to impose new tariffs on Chinese goods on Dec. 15.
Another source of global tension has been Brexit, which has also eased. The European Union has agreed to delay the deadline for Britain’s exit from the trade bloc from Oct. 31 to Jan. 31. That postpones what could have been a hugely disruptive exit, right after the Fed meeting ended, that would likely have damaged the U.K. and European economies.

The Job Market Remains Sturdy

The U.S. economy is still growing, and hiring remains steady, though there have been signs of a slowdown in recent data. Americans cut back on spending at retailers and restaurants last month, a worrisome sign because consumer spending is the leading engine of economic growth. Still, consumer confidence remains high, and shoppers could easily rebound in the coming months.

The job market remains sturdy, with the unemployment rate at just 3.5%, the lowest in 50 years. On Friday, the government will report on employment growth for October. Steady hiring and decent wage gains should help underpin consumer spending in coming months, keeping the economy expanding. 
And businesses have reduced their spending on industrial machinery and other equipment, mostly because the U.S.-China trade war has made them reluctant to commit to big purchases. The tariffs and retaliatory tariffs between the U.S. and China, the world’s two largest economies, have also reduced U.S. exports.
Earlier Wednesday, the government estimated that the economy grew at a tepid but steady 1.9% annual rate during the July-September quarter.
The job market remains sturdy, with the unemployment rate at just 3.5%, the lowest in 50 years. On Friday, the government will report on employment growth for October. Steady hiring and decent wage gains should help underpin consumer spending in coming months, keeping the economy expanding. That could keep the Fed on the sidelines.
The housing market has also improved, after slumping in 2018, thanks in part to the Fed’s rate cuts. Mortgage rates have fallen more than a full percentage point from a year ago, on average, for a 30-year fixed rate loan.
That’s helped boost sales of existing homes while sales of new homes have soared. Auto purchases, another interest rate-sensitive industry, have also picked up.

DON'T MISS

What Are Fresno Real Estate Experts Predicting for 2025 and Beyond?

DON'T MISS

First California EV Mandates Hit Automakers This Year. Most Are Not Even Close

DON'T MISS

What Happens After a Homeless Person Is Arrested for Camping? Often, Not Much

DON'T MISS

Thousands of Pilgrims Trek Through New Mexico Desert to Historic Adobe Church for Good Friday

DON'T MISS

Rams’ Draft Headquarters to Be at LAFD Air Base to Honor First Responders to Wildfires

DON'T MISS

The US Has a Single Rare Earths Mine. Chinese Export Limits Are Energizing a Push for More

DON'T MISS

A Startling Admission From a GOP Senator: ‘We Are All Afraid’

DON'T MISS

Trump Administration Kicks off Plan for Expanded Offshore Drilling

DON'T MISS

Google to Appeal Against Part of US Court’s Decision in Monopoly Case

DON'T MISS

How to Catch the Shooting Stars of Spring’s First Meteor Shower, the Lyrids

DON'T MISS

US Intel Contradicts Trump Claims Linking Gang to Venezuelan Government

DON'T MISS

NASA’s Lucy Spacecraft Is Speeding Toward Another Close Encounter With an Asteroid

UP NEXT

Supreme Court to Hear Arguments on Trump Plan to End Birthright Citizenship

UP NEXT

Popular AIs Head-to-Head: OpenAI Beats DeepSeek on Sentence-Level Reasoning

UP NEXT

Al Sharpton Calls Meeting With Target’s CEO Amid DEI Backlash ‘Very Constructive and Candid’

UP NEXT

Former Pentagon Spokesman Tied to Online DEI Purge Was Asked to Resign

UP NEXT

The Kings Agree to Hire Scott Perry as General Manager, AP Source Says

UP NEXT

Shooting at Florida State Sends Students Running; Nearby Hospital Says It’s Treating People

UP NEXT

Actor Michelle Trachtenberg Died of Complications From Diabetes, Says NYC Medical Examiner

UP NEXT

Zoom Down for Thousands of Users, Downdetector Shows

UP NEXT

Puerto Rico Goes Dark After Widespread Power Plant Failure

UP NEXT

Harper and Realmuto Homer to Help Lead the Phillies to a Win Over the Giants

The US Has a Single Rare Earths Mine. Chinese Export Limits Are Energizing a Push for More

54 minutes ago

A Startling Admission From a GOP Senator: ‘We Are All Afraid’

54 minutes ago

Trump Administration Kicks off Plan for Expanded Offshore Drilling

58 minutes ago

Google to Appeal Against Part of US Court’s Decision in Monopoly Case

1 hour ago

How to Catch the Shooting Stars of Spring’s First Meteor Shower, the Lyrids

1 hour ago

US Intel Contradicts Trump Claims Linking Gang to Venezuelan Government

1 hour ago

NASA’s Lucy Spacecraft Is Speeding Toward Another Close Encounter With an Asteroid

1 hour ago

The Abrego Garcia Case Pulls Democrats Into the Immigration Debate Trump Wants to Have

1 hour ago

Katy Perry Gears Up for Sci-Fi Inspired World Tour

1 hour ago

10,000 Pages of Records About Robert F. Kennedy’s 1968 Assassination Are Released

2 hours ago

What Happens After a Homeless Person Is Arrested for Camping? Often, Not Much

This story was originally published by CalMatters. Sign up for their newsletters. Wickey Two Hands sat at the defense table on a recent Thur...

8 minutes ago

8 minutes ago

What Happens After a Homeless Person Is Arrested for Camping? Often, Not Much

45 minutes ago

Thousands of Pilgrims Trek Through New Mexico Desert to Historic Adobe Church for Good Friday

49 minutes ago

Rams’ Draft Headquarters to Be at LAFD Air Base to Honor First Responders to Wildfires

54 minutes ago

The US Has a Single Rare Earths Mine. Chinese Export Limits Are Energizing a Push for More

Sen. Lisa Murkowski (R-Alaska) walks out of the Senate chamber on Capitol Hill in Washington, Feb. 20, 2025. Murkowski, who has routinely broken with her party to criticize President Donald Trump, has made a startling admission about the reality of serving in public office at a time when an unbound leader in the Oval Office is bent on retribution against his political foes. (Haiyun Jiang/The New York Times)
54 minutes ago

A Startling Admission From a GOP Senator: ‘We Are All Afraid’

President Donald Trump looks on on the day he signs executive orders in the Oval Office at the White House in Washington, D.C., U.S., April 17, 2025. (REUTERS/Evelyn Hockstein)
58 minutes ago

Trump Administration Kicks off Plan for Expanded Offshore Drilling

1 hour ago

Google to Appeal Against Part of US Court’s Decision in Monopoly Case

1 hour ago

How to Catch the Shooting Stars of Spring’s First Meteor Shower, the Lyrids

Help continue the work that gets you the news that matters most.

Search

Send this to a friend