Fed signals a pause after trimming key rate
WASHINGTON — The Federal Reserve cut its benchmark interest rate Wednesday for the third time this year to try to sustain the economic expansion in the face of global threats. But it indicated it won’t cut again in the coming months unless the economic outlook worsens.
The Fed’s move reduces the short-term rate it controls — which influences many consumer and business loans — to a range of 1.5% to 1.75%.
A statement the Fed released after its latest policy meeting removed a key phrase that it has used since June to indicate a future rate cut is likely. And Chairman Jerome Powell suggested the Fed will now pause unless the economic picture darkens.
“If developments emerge that would cause a material reset of our outlook,” he said, “we will respond appropriately.”
The phrase the Fed dropped from its policy statement had said it would “act as appropriate to sustain the expansion.” This was its signal that it expected to continue easing credit to aid the economy. In its new statement, the Fed said it will review the latest economic data as “it assesses the appropriate path” for its benchmark interest rate.
The statement noted job gains have been solid and pointed to strength in consumer spending. But it also pointed out business investment and exports “remain weak.”
Meanwhile, the U.S. economy slowed to a growth rate of 1.9% in the summer as consumer spending downshifted and businesses continued to trim investments in response to trade war uncertainty and a weakening global economy.
The Commerce Department reported the July-September performance for the gross domestic product, the economy’s total output of goods and services, was just below the 2% rate of growth in the second quarter.