Fed cuts rates for second time in 2019

In a widely expected move, the US Federal Reserve on Wednesday cut interest rates by a quarter of a percentage point to a range of 1.75 percent to 2 percent.
 

The Fed has cut interest rates for the second time this year amidst ‘slight’ expectations of a third cut before year-end. This monetary policy aims at addressing the damages of US-China trade war.
 

The Fed has also maintained its forecast for the US economic growth over the next few years, expecting the interest rates to be cut in 2021 and 2022, and not in 2020.
 

There was a clear split among Fed members over further cut in 2019 as a result of uncertainty regarding the trade war, global economic growth and US economy which is still doing well.
 

The central bank added that household spending is increasing at a ‘strong’ pace, while on the other hand, business fixed investments and exports have declined.
 

The Fed has taken another step earlier this week to alleviate restrictions in the capital markets, and hence avoid any possible damage to the economy, through trimming the interest on excess reserves to 1.8 percent, following pouring $75 billion in its repo operations.
 

Federal Reserve Chairman Jerome Powell and his colleagues are attempting to maintain a stable economic growth despite global slowdown, in addition to the uncertainty over the US-China trade war, fears of a recession, and industrial activity slowdown, especially in Germany.
 

Interest rate is expected to stabilize at 1.9 percent until end of 2020. It is also forecast to rise to 2.1 percent and 2.4 percent in 2021 and 2022, respectively, down from the previous forecast of 2.5 percent.
 

Elsewhere, the unemployment rate is projected to stabilize at 3.7 percent in 2019 and 2020, but speculations show it will reach 4.2% on the long run.