At a highly anticipated policy meeting yesterday, the Federal Reserve decided to cut interest rates in the United States by 25 basis points. This is the second such decrease in 2019, the two decreases themselves being the first since the 2008 financial crisis.
Fed Chair Jerome Powell gave a press conference shortly after the meeting concluded. He said that the Federal Reserve remains confident in the strength of the US economy, but is implementing the rate cuts as a preventative measure. Powell is anticipating further damage to the economy because of slowing global growth - in large part due to Donald Trump’s aggressive trade policy and ongoing conflict with China.
Moreover, the Fed Chair reiterated that any further adjustments the central bank does to their policy will be based on current data. They do not plan a sequence of further rate decreases, unless growth stalls and demands it. These statements were likely directed at President Trump, who’s disrespected the independence of the Federal Reserve multiple times, urging them to start lowering interest rates, even when the data did not support such a policy.
Despite the fact that a lower interest rate usually lowers the national currency, the US dollar benefited from the news and appreciated versus both the EUR and the JPY.
