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Fed to cut interest rate first time in a decade

Tuesday, July 30, 2019

Associated Press

WASHINGTON

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.