U.S. central bank cuts rates for third time to prop up economy

Thursday, 31 Oct, 2019

NEW YORK, Oct 30 (Reuters) - U.S. stocks advanced on Wednesday, with the S&P 500 closing at a record for the second time in three sessions, after a policy statement by the U.S. Federal Reserve that cut interest rates by a quarter of a percentage point.

Most analysts expected the US central bank to cut rates again. This marks a further deceleration from the first quarter's 3.1 percent growth rate.

But it signalled its rate-cut cycle might be at a pause.

That was before rising global risks led the Fed to change course and begin easing credit.

Business spending, however, fell by the most in almost four years. Fed leaders signaled Wednesday that they are going to wait and see what happens to the economy and trade talks before they commit to another cut. Analysts said the Fed's messaging matched investor expectations. Decrease inflation expectations could well additionally be self-relaxing.

Unlike the past many months, when the Fed has cut rates to satisfy investors, the Fed will need to become "hyper-dependent" on economic data, according to Danielle DiMartino Booth, CEO of Quill Intelligence and author of "Fed Up: An Insider's Take on Why the Federal Reserve Is Bad for America".

Prior to the announcement, US President Donald Trump was active on Twitter once again and tried to pressure the Fed to aggressively slash rates. Less clear is where central bankers go from here amid signs the economy is slowing down.

In its place was slightly more hawkish language. At the meeting, it was revealed the central bank issued yet another 25-basis point cut, as markets expected.

It is not clear, though, how meaningful such an agreement might be, and Mr Trump has not dropped his threat to impose new tariffs on Chinese goods on December 15.

One other source of worldwide stress has been Brexit, which has additionally eased. The European Union agreed Tuesday to delay the deadline for Britain's exit from the EU trade bloc, changing it from October 31 to January 31.

Risks relating to global trade, as well as to the prospect that Britain would crash out of the European Union, have moved in a "positive direction" since the Fed's last meeting, Powell said, adding that the USA economy has remained resilient.

The governors are nominated by the US president, confirmed by the Senate, and serve 14-year terms.

Americans gash attend on spending at retail outlets and restaurants last month, a worrisome tag because individual spending is the main source of business growth.

And companies like reduced their spending on industrial machinery and utterly different instruments, principally since the U.S.

The tariffs and retaliatory tariffs between the United States and China, the world's two largest economies, have also reduced U.S. exports. "Economic activity has been rising at a moderate rate", it added. That could well abet the Consumed the sidelines in future meetings.

USA economic growth slowed less than expected in the third quarter, a Commerce Department report showed, as declining business investment was offset by resilient consumer spending and a rebound in exports, further allaying financial market fears of a recession.

The federal funds rate refers to the interest rate that banks charge each other for overnight lending, but influences borrowing costs of all types of loans, including mortgages, auto loans, and student loans.

That's helped boost sales of present homes while sales of contemporary homes like soared.

The interest-rate sensitive banking sub-sector pared losses after the statement, but was still down 0.69%.