The Fed lowers the rate due to the uncertainty of global economic expansion

WASHINGTON.- The
The Federal Reserve of the United States lowered its reference rate yesterday for the second time in the year, in a quarter of a point, a measure aimed at maintaining the long economic expansion that, however, caused the president’s angry reaction
Donald Trump, that he expected a much more pronounced cut and that he described his members as cowards.

"¡
Jay Powell and the Federal Reserve fail again! No guts, no sense, no vision! A terrible communicator! "Trump said on his Twitter account, in a new attack on the president of the organization and his board of directors, whom he described in recent months as traitors, enemies and even" idiots. "
The tycoon was expecting a more aggressive casualty that would keep the boom that the country has enjoyed for more than a decade, but that shows clouds precisely when he seeks reelection, in November next year, mounted on the strength of the key indices.

The Fed described a moderate economic scenario, citing the dynamism of the employment market and the moderate growth that follows. He also stressed the "strong pace" of rising consumer spending.

According to the institution that sets US monetary policy, however, the good news cannot hide the clouds on the horizon: in a statement, it said its decision to cut the rate from a range of 1.75% to 2% responded to the risks in the world and the weakness of investment and exports.
While the US economy continues to grow at a "moderate" rate and the labor market "remains strong," the institution said, it decided to cut rates "in light of the implications of global developments for the economic landscape, as well as the nonexistent inflationary pressures. "

With continued growth and strong contracting as "the most likely results," he nevertheless mentioned "uncertainties" about the outlook and promised to "act as appropriate" to maintain the expansion.

However, there were few changes in the projections for the economy. The forecasts point to a growth of 2.2% and an unemployment rate of 3.7% until 2020. The Fed also expects inflation to be 1.5% this year and 1.9% in 2020.
The economy seems sustainable in its eleventh year of growth, with a still strong labor market and constant consumer spending.

However, the Fed is trying to counter some threats, such as the uncertainty caused by Trump's trade war with China, lower world growth and the fall of the US manufacturing industry. The Federal Reserve warned in its statement that "the fixed investment of companies and exports have weakened."

Dissent

The Fed's action was approved in a 7-3 vote, with two officials in favor of keeping interest rates unchanged and one in favor of a larger, half-point cut. That was the largest number of Fed dissidents in three years.

Even so, the measure bothered Trump, who insists that the central bank reduce interest rates more aggressively. The president returned to exasperate himself as he did last July, when the Fed first reduced the interest rate by more than a decade. Now he is far from the tycoon's expectations.
The reference interest rate influences many loans to consumers and businesses.
Also, federal rates in the United States (between 2% and 2.25%) are well above the eurozone and Japan, zero and even negative, so Trump constantly asks for the same level for the dollar and exports remain competitive.
But Powell stressed in a press conference following the official statement that the Fed is not prone to resort to negative rates.
"I don't think we plan to use negative rates. I don't think that is at the top of our list," he said, noting that the Fed was prepared to act "aggressively if necessary."
The markets took it for granted that Powell would announce a reduction in interest rates, although doubts later arose, when that certainty collapsed after attacks over the weekend against oil facilities in Saudi Arabia, which triggered oil prices.
A worsening of the situation could lead to the price of crude continue to climb, although so far this effect had no significant impact on the US economy.
Trade tensions and tariffs remain a Damocles sword for US companies and their investments, although a wave of optimism was moderated recently by high-level talks between Beijing and Washington in October.

Agencies AFP, AP and Reuters

ALSO