Interest Rates Cut by Federal Reserve, Though A Pause Is Coming

    Federal Open Market Committee reduces the benchmark funds rate by 25 basis points to uphold its mission to 'act as appropriate to sustain the expansion'.

    • The cuts lowered benchmark funds rates to 1.5% to 1.75%.
    • The likelihood of another cut in December’s meeting is only about 25%, according to traders.

    Just as expected, the Federal Reserve approved a quarter-point interest rate cut today, which is the third cut that the authority has performed this year. The financial market was anticipating this vote, according to reports from CNBC, during which time the Federal Open Market Committee lowered the benchmark funds rate to 1.5% to 1.75%, which was a difference of 25 points.

    This rate outlines the fees charged by banks for overnight lending, but it is also directly connected to the majority of revolving consumer debt. The cut is being called a “midcycle adjustment” by Fed. Chairman Jerome Powell, as the economy expands. With the decrease, it seems that language was also introduced to establish a higher bar for the future.

    A key clause was removed by the FOMC that was recently in post-meeting statements dating back to June, which indicated that the entity would “act as appropriate to sustain the expansion.” Powell had used the phrase during the rate cut in July, and it has remained in the official language since then.

    Now, a new statement has replaced it,

    “The Committee will continue to monitor the implications of incoming information for the economic outlook as it assesses the appropriate path of the target range for the federal funds rate.”

    In a news conference, Powell aimed to be clearer, commenting that the officials of central banks “see the current stance of monetary policy as likely to remain appropriate.”

    Participants in the market have been observing tentatively, waiting to see if the chairman may signal the end of the policy accommodation. With the new language, it appears that the data dependence is increasing, rather than keeping a focus on lowered adjusted rates. During this meeting, market pricing had remained at approximately 100% for a cut, while traders are only predicting a 25% likelihood of a move in the meeting in December.

    In recent speeches, federal officials have continually highlighted the strength of the US economy, driven by consumer spending. However, they have also expressed that global weakness, Brexit-related uncertainties, and the tariff war with China has been a threat to that strength. While the labor market reportedly “remains strong,” nearly every other activity benchmark has remained the same.

    The government today is reporting 1.9% GDP growth, though the original estimate by Wall Street was 1.6%. Through recent months, despite 109,000 citizens remaining unemployed, the rate is still at a 50-year low at only 3.5%. Stock market averages are also recording new highs.

    Even with these cuts, President Donald Trump has pushed to prevent these rate cuts, hoping to go back to the quantitative easing program employed by the central bank at the time of the financial crisis.

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    Krystle M
    Krystle is an American cryptocurrency blogger that wants to see the future of crypto and blockchain technology evolve. She has been writing about cryptocurrency for about a year, with a special interest in blockchain technology and regulatory measures around the world. While away from writing and learning about the changes in the cryptocurrency industry, she likes to indulge in science fiction novels and further her experience in playing both guitar and piano.

    [Alert] Use the author's self-conducted information at your own risk, do you own research, never invest more than you are willing to lose.

    [Disclosure] The published news and content on BitcoinExchangeGuide should never be used or taken as financial investment advice. Understand trading cryptocurrencies is a very high-risk activity which can result in significant losses. Editorial Policy \\ Investment Disclaimer


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