Fed poised to cut rates again amid uncertainty

The Federal Reserve is poised to cut interest rates today for the second time this year as policymakers try to get ahead of economic risks stemming from a global slowdown, the trade war with China and uncertainty about the road ahead.

What it means

The big question facing the Fed today is whether the expansion will need additional support from the central bank. Although many investors expect another rate cut in October, Chairman Jerome Powell has so far avoided committing the Fed to movement, saying only that it will do what is needed to sustain the U.S. economic expansion now in its 11th year. With rates already ultra-low, few economists think a further modest drop in borrowing costs would provide much economic stimulus. Still, the financial markets are anticipating not only a quarter-point rate cut today when the Fed ends its latest policy meeting but one or more additional cuts later this year.

Previously

Two members of the policy-setting Federal Open Market Committee voted against the Fed’s July rate cut — its first cut in more than a decade — and may dissent against any further reduction at today’s meeting, given that the economy is growing and unemployment remains near a 50-year low. The discord could make it more difficult for Powell to clearly communicate what comes next at a time when the economic outlook itself is particularly hazy.

What to expect

The Fed is expected to cut rates just slightly, to a range between 1.75% and 2%. That remains far above President Donald Trump’s previously stated desire for zero or negative interest rates. Even a modest cut could prove contentious as Fed officials wrestle with mixed economic signals and try to gauge whether the trade war is creating economic uncertainty that should be offset by central bank action.