(31 Jul 2019) The Federal Reserve cut its key interest rate on Wednesday for the first time in a decade to try to counter the impact of US President Donald Trump's trade wars, stubbornly low inflation and global weakness. Stocks tumbled after Powell said the Fed doesn't envision a long series of rate cuts. But later, he seemed to shift his message to leave open the prospect that the Fed would cut again.
Stocks then pared their losses, while bond yields fell.
Powell cast the US economy - the primary focus of the Fed - as fundamentally solid, while pointing repeatedly to the trade conflicts and weakness abroad.
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Yet the chairman seemed to look for the right words to articulate just what the Fed is troubled by at a time when the risk of a recession in the United States seems relatively low and what its rate strategy is now.
"One of the reasons that there is a concern about the Fed is cutting rates right now is that they are now essentially beginning to unload some of their bullets from the monetary policy holster that they would use in the face of a more dramatic financial crisis or downturn," said Mark Hamrick, a senior economic analyst at Bankrate.com.
Hamrick said the Fed believes the interest rate cut will bring inflation levels back to more comfortable levels, with the goal of continued US economic expansion.
The central bank reduced its benchmark rate - which affects many loans for households and businesses - by a quarter-point to a range of 2% to 2.25%.
It's the first rate cut since December 2008 during the depths of the Great Recession, when the Fed slashed its rate to a record low near zero and kept it there until 2015.
The economy is far healthier now despite risks to what's become the longest expansion on record.
In addition to its rate cut, the Fed also said it would stop shrinking its enormous bond portfolio in August, two months earlier than planned.
This step is intended to avoid putting upward pressure on long-term borrowing rates.
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