Fed Lowers Interest Rate by One-Quarter Point

The Federal Reserve lowered its benchmark lending rate by 0.25 point yesterday, marking the central bank’s first decrease since 2008.

The move displeased President Donald Trump, who has been pressuring Fed Chairman Jay Powell for weeks for a larger reduction that would help keep the U.S. economy humming. Last week the U.S. Dept. of Commerce estimated that U.S. economic growth slowed to 2.1% in the second quarter from 3.1% in January-March and 3.5% in the same period in 2018.

Powell says the American economy grew at a “healthy pace” through the first half of 2019, with very low unemployment and strong household spending. But he also notes that manufacturing output has been shrinking, inflation is below the Fed’s 2% target and business fixed investment has been soft.

Wednesday’s 8-to-2 vote lowered the lending rate to a range of 2.0%-2.25%. Analysts widely interpret the action as an exploratory move that likely will be followed soon by at least one more quarter-point cut.

Powell, noting that Wednesday’s action was “well telegraphed,” told reporters that he is not committed to just one reduction. But he also says the move is a “midcycle adjustment” to Fed policy and does not indicate “the beginning of a long series of rate cuts.”

Powell insists the central bank’s actions are not being influenced by political concerns.