Fed to cut interest rate first time in a decade
There’s little dispute that the Federal Reserve this week will do something it hasn’t done since 2008, when the U.S. economy was gripped by the Great Recession: Cut its benchmark interest rate.
This time, by contrast, the economy is solid by most measures. Consumers are spending. Unemployment is close to a half-century low. A recession hardly seems imminent.
Yet the Fed under Chairman Jerome Powell has signaled that rising economic pressures – notably from President Donald Trump’s trade wars and from a global slowdown – have become cause for concern. So has an inflation rate that remains chronically below the Fed’s target level.
So the Fed has decided that a rate cut now – and possibly one or more additional cuts to follow – could help inoculate the economy against a potential downturn.
The idea is that lowering its key short-term rate, which can affect consumer and business loans, could encourage borrowing and spending and energize the economy.