Federal Reserve Announces Interest Rate Cut Amid Strong Economy, but Trade Uncertainty

Federal Reserve Chairman Jerome Powell announced today that there will be an interest rate cut of a quarter of a percentage to 1-3/4 to 2 percent. The interest rate cut is aimed to support “sustained expansion of economic activity, strong labor market conditions, and [a curbed] inflation.” The Fed Chairman reported “that the labor market remains strong and that economic activity has been rising at a moderate rate.” Additionally, “[j]ob gains have been solid,… and the unemployment rate has remained low.” However, “in contrast, business investment and exports have weakened amid falling manufacturing output. The main reasons appear to be slowing growth abroad and trade policy.” Chairman Powell referenced “contacts around the country” who have said “that uncertainty about trade policy has discouraged them from investing in their business.” The Federal Reserve acknowledged the interest rate cut does take into account some effect of trade uncertainty on the economy, but Powell says “it’s hard to quantify [the effect] precisely.”