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CNBC: Fed approves quarter-point rate cut but is divided on further action this year

Article published: Sep 18, 2019

IB Economics syllabus: Macroeconomics (monetary policy)

The FED (U.S. Central Bank) has cut the interest rates again by 0.25%. “The implications of global developments for the economic outlook as well as muted inflation pressures” were given as the reason for the move. This is a direct reference to the trade war between the United States and China which negatively affects economic growth and while this is a form of expansionary monetary policy, Jerome Powell (the chairman), said “these cuts [are] a “midcycle adjustment” and not part of a more aggressive strategy to drive rates lower” – in other words, it is to prevent any further fall in U.S. economic growth but the Fed is not expecting a recession as this is just a “midcycle adjustment” (referring to the business cycle when the economy gets closer to its peak).

Source of image: CNBC video

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