Key rate cut for 2nd time this year

WASHINGTON >> A sharply divided Federal Reserve cut its benchmark interest rate Wednesday for a second time this year while saying it’s prepared to continue doing what it deems necessary to sustain the U.S. economic expansion.

The Fed’s move will reduce its benchmark rate — which influences many consumer and business loans — by an additional quarter-point to a range of 1.75% to 2%.

The action was approved 7-3, with two officials preferring to keep rates unchanged and one arguing for a bigger half-point cut. It was the most Fed dissents in three years.

The U.S. economy appears durable in its 11th year of growth, with a still-solid job market and steady consumer spending. But the Fed is trying to combat threats including uncertainties caused by President Donald Trump’s trade war with China, slower global growth and a slump in American manufacturing. The Fed notes in its statement that “business fixed investment and exports have weakened.”

Still, the Fed’s move will likely displease Trump, who has attacked the Fed and insisted that it slash rates more aggressively.

Updated forecasts issued Wednesday by the Fed show that seven of 17 officials foresee an additional rate cut this year. But the outlook becomes hazier in 2020: At least two officials expect a rate hike next year.

None of the policymakers foresee rates falling below 1.5% in 2020 — a sign that the turbulence from a global slowdown and Trump’s escalation of the trade war is viewed as manageable.

The median forecasts show that the economy is expected to grow a modest 2.2% this year. Unemployment is projected to be 3.7% and inflation 1.5%, below the Fed’s target level of 2%.

Most economists have scaled back their forecasts for further rate cuts this year to one or two beginning with the one the Fed announced Wednesday. A resumption of trade talks between the Trump administration and Beijing and a less antagonistic tone between the two sides have supported that view.