Sharply Divided Fed Again Reduces Rates

A sharply divided Federal Reserve cut its benchmark interest rate Wednesday for a second time this year but declined to signal that further rate cuts are likely this year, the AP reports. The Fed's move reduces its key short-term 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 divisions on the policy committee underscored the challenges confronting Chairman Jerome Powell in guiding the Fed at time of high uncertainty in the US economy. Stock prices fell after the Fed issued a policy statement, reflecting disappointment that it had declined to indicate that more rate cuts are likely this year.

At a news conference, Powell acknowledged that Fed officials are sharply divided about the wisest course to take on interest rates. "This is a time of difficult judgments and disparate perspectives," the chairman said. "I really do think that is nothing but healthy." The Fed's modest rate cut Wednesday irritated Trump, who has attacked the central bank and insisted that it slash rates more aggressively. The president immediately signaled his discontent: "Jay Powell and the Federal Reserve Fail Again," Trump tweeted. "No 'guts,' no sense, no vision! A terrible communicator!" Updated economic and interest rate forecasts issued Wednesday by the Fed show that only seven of 17 officials foresee at least one additional rate cut this year. And at least two Fed officials expect a rate hike next year. (Much more here, or see the Fed's full statement here or what the rate cut means for you here.)