In the face of the risk of recession, the US central bank lowers its interest rate

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Published on 18/09/2019 at 22:45

Updated 9/19/2019 at 9:13 am

The Federal Reserve of the United States (Fed) comes again to the bedside of world growth. The US central bank on Wednesday announced a modest decline in interest rates, the second in two months, anxious to protect the world's largest economy uncertainties weighing on trade and the global economy. Day-to-day interest rates are set in the range of 1.75% to 2%, after a decline of one-quarter of a percentage point (0.25%).

The Fed has painted a mixed picture of the US economy, still citing the dynamism of the labor market and continued moderate growth. While noting the "strong pace" of consumer spending growth, it notes the decline in business investment. Jerome Powell, its president, also noted "two sources of uncertainty: the slowdown in growth abroad and changes in trade policy."

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The Fed is also "not equipped" to counter the consequences of the imposition of reciprocal tariffs between China and the United States, he added at a press conference. President Donald Trump, who is campaigning for zero or even negative rates to help him lower the dollar and boost exports, immediately criticized the decision of the head of the Fed. "Jay (Jerome) Powell and the Federal Reserve have failed again," he fancied on Twitter. "No + cran +, no common sense, no vision! A communicator deplorable!", He added.

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The slight rise in inflation observed in August has so far not changed the Fed's opinion on the price trajectory that remains "below 2%". But it remains confident about the recovery towards this target, added Mr. Powell. The Monetary Committee appeared very divided on the decision, three members voting against, seven for. This is the strongest opposition faced by President Powell since he took office at the head of the Fed in early 2018. As in July, two members opposed saying it was useless to stimulate the economy any further. Conversely, a third wanted a stronger decline.

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Asked, the head of the Fed simply described these differences of opinion as "healthy". The most recent dissension of such magnitude within the FOMC dates back to September 2016 under the leadership of Janet Yellen. On Wednesday, the Fed also slightly raised its US growth forecast to 2.2% this year (+0.1 points). For 2020, it expects + 2% and inflation at 1.9%.

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Regarding future decisions, the average of the projections of the members of the Fed indicates a status quo for the end of the year and 2020. However, they do not presage decisions since the participants in the projections are not all members voting.

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Uncompromising about the future, Jerome Powell reiterated that the path of politics was "not done in advance" and that the Fed would be more than ever "dependent on economic data". Asked about the use of negative rates in the event of a slowdown, as do Europe and Japan, he was not very enthusiastic. "I do not think we would consider using negative rates, I do not think they will be at the top of our list," he said, adding that the Fed was preparing to "be aggressive it turns out that it is necessary ".

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Among the factors that have deteriorated since the July meeting, the Fed cites the weakening of business investment and exports due to concerns over trade tensions. On the currency markets, where the Fed has been intervening in the last two days to offset a lack of liquidity for banks and businesses, Powell said the turmoil "has no impact on the economy or the economy. on monetary policy ".

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"We have taken the appropriate measures," he said, noting that similar measures would be taken in the event of a "new episode of tension". The Fed chairman injected tens of billions of dollars into the money markets on Tuesday and Wednesday to deal with the liquidity shortage.

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