Published: Thu, September 19, 2019
Money | By Ethel Goodwin

Pound US dollar exchange rate softens, all eyes on the Federal Reserve

Pound US dollar exchange rate softens, all eyes on the Federal Reserve

But the Fed's policy committee is divided, with three of 10 voting members dissenting from the decision, one because he wanted even more stimulus.

West Texas Intermediate crude added 0.1% to $58.17 a barrel.Gold was at $1,490.98 an ounce, down 0.2%.

The Fed also agreed to lower the rate banks pay on excess reserves to increase liquidity in other short-term lending markets.

"If the economy does turn down, then a more extensive sequence of rate cuts could be appropriate", Mr Powell said in a news conference after the U.S. central bank announced it had lowered its benchmark overnight lending rate by a quarter of a percentage point to a range of 1.75 per cent to 2.00 per cent. As I will explain shortly, we took this step to help keep the USA economy strong in the face of some notable developments, and to provide insurance against ongoing risks.

Still, traders of interest rate futures were betting on one more quarter-point rate cut this year. Officials maintained their pledge to "act as appropriate to sustain the expansion". "Insurance" is a very broad scope and one day it is inflation, then it could be trade, then it could be domestic worries, and then it could be a worsening global outlook. The S&P 500 ended the day flat after wiping out losses in the wake of the Fed cutting its benchmark rate but holding off on signaling another move is probable.

If anything else, it looks like Powell & co. are hoping that markets will find comfort in the data and global developments to price out expectations of a rate cut.

The rate cut, Powell said, was decided after global growth slowed and trade tensions worsened in the past months.

The Fed faces an unusual challenge setting policy given the volatile outlook for the global trading environment, that has chilled business investment.

There's a "limit to how much lower to [rates], so I'd rather wait until we really need it. It's a challenging time, I admit it". Those agreements are a key feature of USA financial markets, and their cost a key barometer of whether short-term markets are functioning well.

The Federal Reserve is cutting rates for a second time this year while saying it's prepared to continue doing what it deems necessary to sustain the us economic expansion. Consumer spending has been solid, but manufacturing has weakened. Yet most analysts foresee no significant agreement emerging this fall in the conflict.

Hiring has slowed this year. The 30-year bond last rose 27/32 in price to yield 2.2413%, from 2.28% late on Tuesday. At the same time, wage growth hasn't accelerated substantially this year, as would occur when the demand for workers outstrips supply.

After repeated attacks on Powell and the central bank, whom Trump recently described as "boneheads", it was hardly surprising that the president expressed his unhappiness with the Fed chair's mild rate cut.

In addition to releasing a statement about the new interest rate level, the Fed will also release its quarterly economic projections on Wednesday.

Though the USA economy continues growing at a "moderate" rate and the labor market "remains strong", the Fed said in its policy statement that it was cutting rates "in light of the implications of global developments for the economic outlook as well as muted inflation pressures".

Mr Trump blasted Mr Powell, saying the central bank chief had "No 'guts, ' no sense, no vision!"

The Fed also reported Tuesday that United States manufacturing, which had been hit hard by Trump's trade wars, had recovered somewhat in August, driving U.S. industrial output up more than economists had expected.

They voted to lower the benchmark rate by a quarter of a percentage point to a target range of 1.75 to 2 percent.

Trump wasted no time in slamming the Fed on Twitter - continuing his relentless campaign to pressure the central bank to provide additional stimulus to the economy.

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