WASHINGTON (AFP) – The US Federal Reserve (Fed) cut its benchmark interest rate for the third straight time on Wednesday but is likely to hold off before providing more stimulus as it gauges economic risks.
Though President Donald Trump’s trade war with China and Brexit concerns have created uncertainties that have crimped business investment and undermined manufacturing, the American economy has remained ”resilient,” and monetary policy is now ”in a good place,” Fed Chairman Jerome Powell said.
The Fed’s policy-setting Federal Open Market Committee lowered the policy interest rate by 25 basis points to a target range of 1.5-1.75 percent, as expected, pulling back another of the four interest rate increases it implemented in 2018.
”We took this step to help keep the US economy strong in the face of global developments, and to provide some insurance against ongoing risks,” Powell told reporters.
Added to a key change in the language of the statement issued by the policy-setting Federal Open Market Committee, the comments cement the view the Fed is for now unlikely to cut rates again in the final meeting of the year.
Pressed to explain under what conditions policymakers would consider another dose of stimulus as appropriate, Powell said, ”if developments emerge that cause a material reassessment of our outlook, we would respond accordingly.”
He pointed to trade tensions and Brexit as factors crimping business investment and manufacturing but ”overall we see the economy as having been resilient to the winds that have been blowing this year.”
Given signs of a possible ”phase one” trade deal with China and the diminished risk of a no-deal Brexit, ”there is plenty of risk left but I would have to say the risks seem to have subsided.”