US central bank expected to cut rates for the first time in a decade
The US Federal Reserve is widely expected to cut rates today, from 2.5% to 2.25%—the first reduction since 2008.
The American economy experienced an uptick in GDP growth from a 2.2% rate in 2017 to a 2.9% rate in 2018, but has since entered a period of slower growth since mid-2018. Indeed, the GDP growth rate dropped to just 1.1% in the fourth quarter of 2018, but has since recovered to above 2% in the first half of 2019. Nonetheless, unemployment remains at a historic low of just 3.8%.
While the world’s largest economy appears to be on a stable footing for now, slowing growth and global economic instability appear to have pushed the Fed to cut rates and inject liquidity into the economy—a move that President Trump has called for in no uncertain terms.
With a rate cut today, the US economy will likely see a boost in growth in the short term. Analysts and investors will watch Chairman Jerome Powell’s statement closely to see whether the Fed leaves open the possibility of further cuts.
Maintaining significant economic momentum is key for Mr Trump’s hopes for re-election—he has painted himself as an expert economic manager and a second term in the White House is largely predicated on strong economic outcomes. President Trump could also be emboldened to double down on aggressive protectionist trade policies if the domestic economy continues to grow unabated.
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