The battle over the Federal Reserve interest rate has raged for many months now, and likely will continue too. But today, we entered a new phase of that battle.
The Fed announced today that they would be lowering interest rates another quarter of a percentage point. The move comes amidst growing uncertainty about America’s economic future, and answers in part the President’s constant complaints about the policy of Chairman Jay Powell and his peers.
Another Cut, More Questions
The Fed announced Wednesday afternoon that they would be cutting interest rates another quarter of a percent, for the second time since July. The rate, correlated to the cost of mortgages, credit cards, and other loans, will now rest between 1.75 percent and 2 percent.
Chairman Powell’s explanation for the decision was simple: “we took this step to keep the economy strong,” he said during his press conference.
In an economic climate of uncertainty, there is increasing tension between policymakers and even the members of the Fed itself. They remain divided on the best path forward to forestall economic decline. And President Trump has been the loudest voice for swift and decisive action. But Chairman Powell has been resistant to those demands.
“Generally Fed participants think [our goals] will be achieved with modest adjustments to the federal funds rate,” Powell said. But he left the door open for more dramatic cuts in the event of a real economic downturn:
“If the economy does turn down, then a more extensive series of rate cuts could be appropriate.” Reassuring investors, he clarified: “we don’t see that. We don’t expect that.”
Trump Weighs In
President Trump has long viewed Jerome Powell as an adversary. Believing the Fed is acting too slowly, Trump has pressured Powell for many months to counteract the potential economic downturn more decisively. But even two cuts in three months couldn’t appease the Commander in Chief.
That would be a pretty decisive put-down, and it seems like no amount of cuts will fully please the President. Therefore, it’s fortunate that Chairman Powell has largely drowned out the noise so far. As much as the President might disagree, that’s the best thing for the country and for the economy.