US Fed cuts key interest rate amid economic 'uncertainties'

The US Federal Reserve cut the benchmark lending rate on Wednesday for the first time in more than a decade, moving to stimulate the economy after a year of sustained pressure from President Donald Trump.

The target for the federal funds rate is now 2.0-2.25 percent, 25 basis points lower, and the central bank vowed to "act as appropriate to sustain the expansion." However, two officials on the policy-setting Federal Open Market Committee opposed the move to provide more stimulus to the economy and dissented in the vote.

The Fed also gave Trump something else he has demanded in his unrelenting attacks: an early end to a policy known as "quantitative tightening" or QT.

Beginning August 1, that means the Fed will stop reducing the huge amount of securities it built up during the global financial crisis.

"In light of the implications of global developments for the economic outlook as well as muted inflation pressures, the committee decided to lower the target range for the federal funds rate to 2 to 2-1/4 percent," the FOMC statement said.

While the committee continues to expect sustained economic expansion and gradually rising inflation to the Fed's two percent target, "uncertainties about this outlook remain."
Officials will "continue to monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion, with a strong labour market and inflation near its symmetric 2 percent objective."
However, Esther George, head of the Kansas City Federal Reserve bank, and Eric Rosengren, of Boston, dissented in the 8-2 vote, because they "preferred at this meeting to maintain the target range for the federal funds rate at 2-1/4 to 2-1/2 percent." The statement recognized that the "labor market remains strong and that economic activity has been rising at a moderate rate."