Fed poised to cut interest rates a third time this year
The Federal Reserve is deciding whether to cut for the third time this year the short-term interest rate it controls, a decision the U.S. central bank will announce at 2 p.m. E.T.
Wall Street expects chairman Jay Powell to announce a cut of 0.25 percentage points, in keeping with recent data showing the U.S. economy’s growth rate slowing somewhat. However, investors cannot agree on what comes next, and will be keenly focused on Powell’s 2:30 p.m. press conference explaining Fed officials’ take on the economy.
“All eyes and ears will be focused on the accompanying statement and press conference, which is potentially more important than the rate cut,” Gregory Leo, chief investment officer and head of global wealth management at IDB Bank, said in a note. “The economy clearly has slowed and needs an added boost.”
The Fed statement follows a report Wednesday morning that the economy grew at a 1.9% annual rate in the July-to-September quarter. That is down from 2.9% for the year-earlier period.
The Fed’s previous rate cuts, in late July and September, have boosted home sales by lowering mortgage rates. Business spending, however, fell in the third quarter by the most in nearly four years. Many companies have said they have postponed major investment projects because of uncertainties stemming from the U.S.-China trade war.
A third rate cut this year would nearly reverse the four rate hikes that the Fed made last year in response to a strengthening economy. While some investors are hoping for a fourth rate cut this year, others say it is too premature.
“As long as economic readings stabilize and inflation continues to edge higher, we do not think that the Fed will ease again in December,” Ben Ayers, senior economist at Nationwide, said in a note.
Ayers added that financial markets are predicting less than a 1-in-4 chance of another rate cut before 2020. “There is higher degree of uncertainty than usual, however, and a negative turn in growth readings or geopolitics could prompt further stimulus from the Fed to sustain the expansion,” he said.
CBS News’ Irina Ivanova contributed reporting.
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