Fed vs. inflation

Fed cuts interest rates – for the first time this year

As expected, the Federal Reserve cuts interest rates by 25 basis points to 4.00-4.25 percent. This is the first cut so far this year.

“The latest indicators point to a slowdown in economic growth during the first half of the year. Job growth has slowed and unemployment has risen, although it remains low,” the Fed majority wrote in a press release.

At the same time, the Fed is open to more cuts – the interest rate path is being lowered. The central bank’s forecast is now a median interest rate of 3.6 percent in December.

Fed members disagreed on the cut. President Donald Trump’s new addition to the Fed, loyalist Stephen Miran, had wanted a 50 basis point cut instead when he first participated in the vote.

Powell warns the market to take more cuts for granted

Fed Chairman Jerome Powell justifies today's decision to cut interest rates with a weaker outlook for the US economy and the labor market. The door for further cuts is open – but Powell warns the market not to take them for granted.

– Two more cuts are a possibility, not a certainty, says Powell during the press conference after the interest rate announcement, noting that the central bank faces "historically rare challenges".

– There are no risk-free options these days. It is not obvious how we should act.

At the same time, the Fed leaders surprised by unexpectedly agreeing on a 25-basis point cut. The new Fed chief Stephen Miran was the only one to vote for a 50-basis point cut.

– There was no broad support for further cuts, says Powell.