The Federal Reserve held the line on interest rates Wednesday — but indicated that rate cuts to boost the U.S. economy could be coming soon.
The Fed “removed the key word ‘patient’ from its policy statement, while noting that ‘uncertainties’ about its previously rosy economic outlook have increased,” reports Axios. “This marks a significant shift in tone for the central bank.”
At a news conference, Fed Chairman Jerome Powell “pointed to President Trump’s renewed trade war with China and softening global growth” as reasons the Fed may shift its stance and move toward a rate cut, says the New York Times, noting that interest rates haven’t been cut since 2008.
The Fed kept its benchmark rate steady between 2.25% and 2.5%.
Wednesday’s decision not to lower rates steady shrugged off pressure from Trump, who suggested earlier this week he might demote Powell if rates aren’t cut.
But the Fed’s report says business investment is slowing, uncertainty has increased, and the U.S. economy is growing at a “moderate” pace — “a notable downgrade from last month when the central bank characterized the economy as ‘solid,’” says the Washington Post.
“Wall Street investors are widely anticipating a rate reduction when Fed leaders meet next in late July,” the Post says, “because of Trump’s trade war and slumping business investment, especially in manufacturing. Stocks rallied with the Dow jumping about 100 points after the Fed’s decision,” before falling back to a 38-point gain.
MarketWatch had a somewhat different take on the situation, saying the Fed “signaled it’s unlikely to cut borrowing costs in 2019, but … also left itself wiggle room by saying it would ‘closely monitor’ the economy.”
