INSUBCONTINENT EXCLUSIVE:
interest rates on Wednesday to help sustain a record-long economic expansion but signalled a higher bar to further reductions in borrowing
costs, eliciting a fast and sharp rebuke from US President Donald Trump.Describing the US economic outlook as "favourable", Federal Reserve
Chairman Jerome Powell said the rate cut was designed "to provide insurance against ongoing risks" including weak global growth and
resurgent trade tensions."If the economy does turn down, then a more extensive sequence of rate cuts could be appropriate," Mr Powell said
in a news conference after the US central bank announced it had lowered its benchmark overnight lending rate by a quarter of a percentage
point to a range of 1.75 per cent to 2.00 per cent
It was the second Fed rate cut this year.But, Mr Powell said, "what we think we are facing here is a situation which can be addressed, which
should be addressed, with moderate adjustments to the federal funds rate," noting that the US labour market was strong and inflation was
likely to return to the Fed's 2 per cent annual goal."We are going to be highly data-dependent We are not on a pre-set course, we are
going to be making decisions meeting by meeting," Mr Powell said, adding that the Fed would stop cutting rates "when we think we've done
enough."Mr Trump blasted Mr Powell, saying the central bank chief had "No 'guts,' no sense, no vision!""A terrible communicator," Mr Trump
tweeted before Mr Powell had even begun his news conference.Later, Mr Trump told reporters during a trip to California: "I think it's fine
I think that frankly they should have acted faster."Underscoring divisions within the central bank, the quarter-point rate cut on Wednesday
drew dissents from three of the 10 voting policymakers.Kansas City Fed President Esther George and Boston Fed President Eric Rosengren
called for no rate cut, and St Louis Fed President James Bullard wanted a bigger half-point rate cut.Forecasts from all 17 policymakers
released at the end of the meeting showed even broader disagreement, with seven expecting a third rate cut this year, five seeing the
current rate cut as the last for 2019, and five who appeared to have been against even Wednesday's move.Technical adjustmentsThe central
bank also widened the gap between the interest it pays banks on excess reserves and the top of its policy rate range, a step taken to smooth
out problems in money markets that prompted a market intervention by the New York Fed this week.In a hint that the Fed may soon take bigger
steps, Mr Powell acknowledged that strains in funding markets had been bigger than expected, and he said the central bank may need to resume
increases to the Fed's balance sheet "earlier" than previously thought.US stocks, lower ahead of the statement, extended their losses and
the US Treasury yield curve flattened
The 10-year Treasury note yield inched up to 1.79 per cent.The dollar gained ground against the euro and yen."Another rate cut from the Fed
to try to shield the US economy from global headwinds," said Joe Manimbo, senior market analyst at Western Union Business Solutions in
"Today's move was more of a hawkish easing in that the Fed's median forecasts for rates suggested no more cuts this year, while some
officials dissented."Still, traders of interest rate futures were betting on one more quarter-point rate cut this year.New projections
showed Fed policymakers at the median expected rates to stay within the new range through 2020."There is a lot of uncertainty" around
rate-path views and the economic outlook, Mr Powell said.There was little change in policymakers' projections for the economy, with GDP
growth seen at a slightly higher 2.2 per cent this year and the unemployment rate to be 3.7 per cent through 2020
Inflation is projected to be 1.5 per cent for the year, below the Fed's 2 per cent target, before rising to 1.9 per cent next year.The Fed
also cut rates in July, the first such move since 2008, as it responded to risks from Mr Trump's trade war with China and other overseas
developments.Get Breaking news, live coverage, and Latest News from India and around the world on TheIndianSubcontinent.com
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