NOVEMBER 4, 2019 – FED CUTS INTEREST RATES BY 25 BPS
As anticipated, the Fed lowered the benchmark interest rate by 25 basis points last week. Rates now stand in a range of 1.5% to 1.75%. The drop in rates as the third one this year as part of Fed Chairman Jerome Powell’s “mid-cycle adjustment” in a maturing economic expansion.
Language in the release indicates, going forward, future easing will not happen unless the economic data warrants further action. This was done by removing a clause that had been in post-meeting statements since June saying it was committed to “act as appropriate to sustain the expansion.” Instead the release said, “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’s decision came out on the same day as GDP growth was reported at 1.9%, a deceleration, but beating expectations for 1.6%. Job gains remain above the 109,000 needed to keep the unemployment rate near the 50-year low of 3.5%. On Friday, it was reported the US economy added 128,000 new jobs, well above expectations of 75,000.
The vote was not unanimous with regional presidents from Kansas City and Boston maintaining rates should not have been changed.