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Rate cut by US Fed leaves Trump unimpressed

The US central bank, the Federal Reserve, cut interest rates yesterday for the first time in over 10 years. The Federal Open Market Committee (FOMC), the committee responsible for rate decisions, took the step to cut the rate to 2%, down from the previous 2.25%.

In a news release explaining the decision, the Fed stated that information received since the FOMC met in June indicated that the labour market remains strong and that economic activity has been rising at a moderate rate. Job gains have been solid, on average, in recent months, and the unemployment rate has remained low. Although growth of household spending has picked up from earlier in the year, growth of business fixed investment has been soft. 

The Fed commented that the rate cut supported the committee's view that sustained expansion of economic activity, strong labour market conditions, and inflation near the committee's symmetric 2% objective are the most likely outcomes, but did note that uncertainties about this outlook remain.

President Trump expressed his displeasure at the action by the Fed and its Chair, Jerome 'Jay' Powell, by taking to Twitter, stating: "What the Market wanted to hear from Jay Powell and the Federal Reserve was that this was the beginning of a lengthy and aggressive rate-cutting cycle which would keep pace with China, The European Union and other countries around the world...."

Trump continued: "....As usual, Powell let us down, but at least he is ending quantitative tightening, which shouldn’t have started in the first place - no inflation. We are winning anyway, but I am certainly not getting much help from the Federal Reserve!"

In his press conference following the rate announcement, Powell pointed out that the rate reduction had been "well telegraphed". He added that the move was a "mid-cycle adjustment to policy" instead of the beginning of a more lengthy cutting cycle, but also commented that he was not committing to "just one" cut. 


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Cash & Liquidity Management in North America
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