WASHINGTON: The Federal Reserve cut interest rates on Wednesday for the first time since 2008, citing concerns about the global economy and muted US inflation, and signalled a readiness to lower borrowing costs further if needed.

Financial markets had widely expected the quarter-percentage-point rate cut, which lowered the US central bank’s benchmark overnight lending rate to a target range of 2pc to 2.25pc.

In a statement at the end of its latest two-day policy meeting, the Fed said it had decided to cut rates “in light of the implications of global developments for the economic outlook as well as muted inflation pressures.” The Fed said it will “continue to monitor” how incoming information will affect the economy, adding that it “will act as appropriate to sustain” a record-long US economic expansion.

“It’s smart of them to go ahead and take out some insurance here. It’s better than none at all,” said Brett Ewing, chief market strategist at First Franklin Financial Services in Tallahassee, Florida.The decision drew dissents from Boston Fed President Eric Rosengren and Kansas City Fed President Esther George who argued for leaving rates unchanged.

Both have raised doubts about a rate cut in the face of the current expansion, an unemployment rate that is near a 50-year-low, and robust household spending.

On the opposite flank, President Trump is likely to be disappointed the Fed did not deliver the large rate cut he had demanded.

Trump has repeatedly harangued the central bank and Fed Chairman Jerome Powell for not doing enough to help his administration’s efforts to boost economic growth.

Powell and other Fed officials in recent weeks have walked a middle ground, flagging risks like continued uncertainty on the global trade front, low inflation and a weakening world economy, but repeating the view the United States is fundamentally in a good spot.

Published in Dawn, August 1st, 2019