US Federal Reserve cuts rates for third time this year as economy slows
A third rate cut in consecutive meetings is ordered as the US rate-setting committee sees continuing trade war damage.
Wednesday 30 October 2019 19:28, UK
The US central bank has cut interest rates for the third time in four months, hours after official figures showed the slowdown in the economy was continuing.
The Federal Reserve said it was to trim the benchmark rate to the range of 1.5%-1.75%, citing weak exports and business investment as the US-China trade war continues.
But the Fed also confirmed that this was likely to be the last rate move under its current outlook for the economy.
At a news conference to explain its policy stance, chairman Jay Powell told reporters he was content that several risks had eased, including the chances of a no-deal Brexit in the UK.
The Fed made the announcement shortly after the release of the first estimate for US economic growth in the third quarter.
It showed the annual rate of growth slowing further - to its lowest reading this year - from 2% in the previous three months to 1.9% between July and September.
The commerce department said declining business investment was offset by resilient consumer spending and a partial rebound in exports - damaged this year by a strong dollar coupled with the effects of an escalation in the trade war.
A rate cut tends to weaken a currency.
A faster pace of interest rate cuts had been demanded by President Donald Trump, who has used record US stock market values this week as evidence of confidence in his economic policies.
He announced this month a delay in the imposition of additional tariffs on China - giving rise to growing hopes of a truce ahead.
The Fed said that hopes of an interim agreement next month were among its weaker risk factors.
The effects of the trade war have been blamed for damaging business confidence across the world, contributing to a slowdown in global growth - particularly in export-led economies such as Germany which is tipped to be in recession.
Financial markets gave little reaction to the Fed's move as it was widely expected.
Hinesh Patel, portfolio manager at Quilter Investors, said: "Following this rate cut the Federal Reserve has signalled a pause, awaiting the development of future macroeconomic data before deciding on further interest rate policy adjustments.
"In our view, the Fed will struggle to meet their dual-objective of full-employment and inflation-target over the medium-term, meaning further rate cuts must remain on the table, despite what chairman Powell would rather do."