Market Overview

Fed Issues Third Rate Cut Of 2019

Fed Issues Third Rate Cut Of 2019

In a move that was widely expected, the Federal Reserve issued its third 0.25% interest rate cut of 2019 on Wednesday. Despite the cut, the Fed reassured investors the U.S. economy is strong and the labor market remains solid.

“The Committee will continue to monitor the implications of incoming information for the economic outlook as it assesses the appropriate path of the target range for the federal funds rate,” the Fed said in a statement.

The rate cut comes after the U.S. reported 1.9% GDP growth in the third quarter on Wednesday, down from 2% in the second quarter but well above consensus economist forecasts of 1.6% growth. The Commerce Department said growth was driven by a 2.9% increase in personal consumption expenditures and a 2% increase in government spending.

Two of the 10 Fed members voted against the rate cut: Esther George of Kansas City and Eric Rosengren of Boston represented the dissenting votes.

The Federal Reserve has been under pressure all year from President Donald Trump to cut interest rates, raising concerns about the Fed’s independence.

“The Fed doesn’t have a clue!” Trump tweeted on Tuesday. “We have unlimited potential, only held back by the Federal Reserve. But we are winning anyway!.”

Global Slowdown

The Fed decision comes after global growth rates have been under pressure in recent quarters.

Earlier this month, the International Monetary Fund cut its 2019 global economic growth forecast for the third time this year from 3.2% to 3%. That updated target represents the slowest pace of global economic growth since the financial crisis in 2008 and 2009.

Last month, a Wall Street Journal survey found private-sector economists are calling for just 1.7% U.S. GDP growth in 2020.

Markets React

The SPDR S&P 500 ETF Trust (NYSE: SPY) traded slightly higher after the Fed announcement but was down 0.2% on the day.

The yield on 10-year U.S. Treasury bonds declined slightly on Wednesday to 1.808%, down 0.027% on the day.

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Photo credit: Dan Smith - Own work via Wikimedia Commons

Posted-In: Donald TrumpNews Bonds Econ #s Top Stories Federal Reserve Markets Best of Benzinga


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