As Predicted, Fed Cuts Rate by 25 Points

As widely predicted by economists and analysts, the Federal Reserve announced they have cut rates down 25 basis points which currently range from 1.75% to 2%.  As with the previous rate cut in July, Chairman Jerome Powell cited a poor global economy as the reason for the cut.  However, this time he also noted a weakening US exports, an impact from the US-China trade war.

Concerns over a global slowdown is on the mind of the Reserve and economists alike.  However, the US economy is still going strong.   Consumer spending is still on the rise, as was the case when the first cut was made in July, the first time since 2008. 

Some believed the rate should have been cut by more – looking at 50 basis points.  Stocks fell as the announcement of just 25 basis points were cut.  The most disappointed, to put it lightly, was the President, who pushed for rates closer to zero or even negative rates.  However, the Fed did leave language for possible additional cuts in the future.  Powell and the Reserve want to do what they can to prevent a recession though many are divided on whether there will be additional cuts in the future.  Out of the 17 leaders in the Federal Reserve, less than half believe there will be another cut this year. 

Today’s announcement also generated many dissents.  As mentioned, some believe the rate should have been cut more while others don’t believe the rate should have been cut at all.  Consumer confidence and historic low unemployment rates continue to help bolster the economy, despite the slowing manufacturing sector.  Analysts believe inflation rates will remain steady as well.

After the initial tumble of stocks after the announcement, the Dow ended the day in the green.  It rallied and rose 36 points.  The Standard & Poor also rose moderately, ending the day with 1 point to 3006.73.  The Nasdaq, however, didn’t fair so well and dropped nearly 9 points, ending the day at 8,177.39.