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For the first time since the 2008 financial crisis, the Federal Reserve cut its key rate by a quarter point on Wednesday. US President Donald Trump has favored a more significant cut.
The Federal Reserve (Fed) cut its key quarterly rate from 2.00% to 2.25% on Wednesday, July 31 to boost the US risk economy. This decision – the first since the 2008 crisis – can be explained by the weakness of the global economy, the overcoming of trade tensions and the desire to revive inflation.
The monetary commission has left the door open for a new gesture, saying it will act "appropriately in support of growth". But at this point, Powell planted some confusion at the same time, saying that the Fed did not refer to a "long cycle" of decline and then suggested that further cuts were not excluded.
Wall Street withdrew after the announcement during Jerome Powell's press conference and ended the session with significant losses. The yield on the two-year loan, most sensitive to interest rate fluctuations, rose to 1.88%. The dollar index has peaked for more than two years, with gains of about 0.5% per day.
Donald Trump was not happy
Two members of the Monetary Policy Committee, Boston Fed Chairman Eric Rosengren and his Federal Reserve colleague Esther George, spoke out against the decision and argued for a status quo on the rates.
The central bank's move did not satisfy US President Donald Trump who has pledged further downfall. Donald Trump has repeatedly criticized Jerome Powell, rebuking him for not doing enough to support his administration's efforts to support growth. A White House tenant seeking a second term wants low rates for the consumer, reducing debt costs and boosting the Dow on Wall Street.
The Fed "betrayed us," Donald Trump responded Wednesday. The market wanted a signal that an "extended and aggressive rate reduction cycle" is under way, he added. The cycle "puts us in harmony with China, the European Union and other countries around the world," Trump continued. "At least he (Powell) puts an end to quantitative consolidation that by no means should have happened."
As usual, Powell has not let up, but at least ends up in quantitative tightening, which shouldn't start in the first place – no inflation. We still win, but I don't get much help from the Federal Reserve!
Donald J. Trump (@realDonaldTrump) July 31, 2019
While defending its independence, the Fed is finally acting in the direction of President Trump. Jerome Powell has been barred from relinquishing White House pressure. "We never consider political considerations, we do not conduct monetary policy to prove our independence," he said.
With AFP and Reuters