Fed trims rate by 25bps amid job market concerns

WASHINGTON: The Federal Reserve cut interest rates by a quarter of a percentage point on Wednesday and indicated it will steadily lower borrowing costs for the rest of this year, as policymakers responded to concerns about weakness in the job market in a move that won support from most of President Donald Trump’s central bank appointees.

Only new governor Stephen Miran, who joined the Fed on Tuesday and is on leave as the head of the White House’s Council of Economic Advisers, dissented in favor of a half-percentage-point cut. The rate cut, along with projections showing two more quarter-percentagepoint reductions are anticipated at the remaining two policy meets this year, indicate Fed officials have begun to downplay the risk that the administration’s trade policies will stoke persistent inflation, and are now more concerned about weakening growth and the likelihood of rising unemployment.

The cut, the first move by the policy-setting federal open market committee since Dec, moves the policy rate to the 4-4.25 per cent range.

“The committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment have risen,” the Fed said in its policy statement. “Job gains have slowed, and the unemployment rate has edged up.”

New economic projections showed policymakers at the median still see inflation ending this year at 3 per cent, well above the central bank’s 2 per cent target, a projection unchanged from the Fed’s last set of forecasts published in June. The projection for unemployment was also unchanged at 4.5 per cent and economic growth slightly higher at 1.6% versus 1.4 per cent.
(REUTERS)