The Federal Reserve (FED) has cut interest rates For the first time since 2008, In the interest rate cut, the central bank cut the funding rate to a range of 2.00 – 2.25.
Supporters of the interest rate cut would say that this move would stimulate the American economy, giving signals that it needed help. Opponents say the rate cut will not help the economy, and the FED has succumbed to pressure from President Donald Trump, who demanded a major rate cut.
Reducing interest rates makes money cheaper for businesses and consumers. However, the decision was not taken unanimously. Two members of the Free Market Committee of the FED, which is responsible for determining interest rates, opposed the interest rate cut. Eight members, including FED President Jerome Powell and Vice President John Williams, supported the decision.
Trade wars and low inflation
At a press conference following the announcement, Powell said that the US economy was growing “at a healthy pace” in the first six months of the year. However, Powell stressed that there were “positive and negative” developments in the economy. “Manufacturing has fallen in two quarters in a row,” Powell said.
Powell stressed that weak growth in the global economy also played a role in the FED’s decision. The Federal Reserve Chairman also said that criticizing Washington’s trade policy, which dominated the trade war with China, was not the job of the Central Bank, but stressed that the tensions in trade policy “almost boiled” in May and June, but now “seem to be cooling down”. Powell also rejected President Trump’s criticism of yielding pressure to cut interest rates and argued that political considerations “had no place” in central bank negotiations.
In the written statement of the Fed, the employment market continued to give strong signals and economic activities increased at a moderate pace. Currently, inflation is lower than US managers want to see, and this is one of the reasons for the interest rate cut.
Currently the US economy is creating many jobs, unemployment fell to the lowest level of the last 49 years in May. However, economists stress that the majority of employment is created in the service sector in low-paying jobs that offer little working hours.
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