Politics & MoneyMortgage

Fed almost certain to cut rates in September

Fed Chair Jerome Powell says he will act “as appropriate”

The Federal Reserve is expected to cut rates once again when the Federal Open Markets Committee meets in September.

Federal Reserve Chair Jerome Powell responded that the Fed would act “as appropriate” in order to maintain the current economic expansion. 

In fact, the Fed funds futures are giving a rate cut a 100% chance in September’s meeting.

“Our obligation is to use our tools to support the economy, and that’s what we’ll continue to do,” Powell said at the University of Zurich, according to an article by John Revill and Brenna Hughes Neghaiwi for Reuters.

However, Powell did float out that there is disagreement in the ranks about the direction the Fed should take, the Reuters article pointed out.

“We are clearly at a time where there is a range of views,” Powell said.

The Fed minutes from the July meeting showed that more rate cuts are likely through the end of 2020.

At the end of its most recent July meeting, the Federal Reserve cut its benchmark rate by a quarter percentage point in a bid to keep the longest economic expansion in U.S. history from petering out. It was the first reduction since the financial crisis more than a decade ago.

At the end of August, President Donald Trump called on the Federal Reserve to reduce the federal funds rate by 100 basis points, saying it is purposefully keeping the economy low for the 2020 election.

Trump said the Fed should lower rates, and even look at further action.

“The Fed Rate, over a fairly short period of time, should be reduced by at least 100 basis points, with perhaps some quantitative easing as well,” Trump tweeted.

However, Powell disclosed in no uncertain terms that political factors are not playing a role in his decision making.

“Political factors play absolutely no role in our process, and my colleagues and I would not tolerate any attempt to include them in our decision-making or our discussions,” he said. “We are going to act as appropriate to sustain the expansion.”

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