This is the Fed’s third rate cut of the year, but another cut seems unlikely.
“We believe that monetary policy is in a good place,” Chairman Jerome Powell told a press conference.
“The US economy is in its 11th year of expansion, and the baseline outlook remains favourable. The overall economy is growing at a moderate rate. Household spending continues to be strong – supported by a healthy job market, rising incomes, and solid consumer confidence.”
But Mr Powell also acknowledged weak business investment and exports, and noted that manufacturing output has slumped amid sluggish global growth and the US-China trade war.
“Looking ahead, we continue to expect the economy to expand at a moderate rate, reflecting solid household spending and supportive financial conditions,” Chairman Powell said.
Chairman Powell didn’t rule out the possibility of another cut.
“Of course, if developments emerge that cause a material reassessment of our outlook, we would respond accordingly. Policy is not on a preset course.”
But the Fed’s current stance should also be good for investors.
“A Fed that remains singularly focused on an inflation target of 2 per cent or higher – which appears unattainable anytime soon – means that rates will be pinned around these levels for the foreseeable future,” said Michael Buchanan, deputy chief investment officer at Western Asset Management.
“This removes the risk that we might see the same kind of rate volatility which hurt spread sectors during 2018. This, combined with the potential for a de-escalation in trade tensions between the US and China, sets up a very supportive backdrop for credit.”
