The Federal Open Market Committee (FOMC) announced Wednesday afternoon that it would cut benchmark interest rate by a quarter-point to about 2.25 percent for the first time since the financial crisis more than a decade ago.
According to the Fed’s policy statement, the move is aimed at protecting the record-long U.S. economic expansion against growing global risks including the potentially harmful effects of a growth slowdown in Europe, as well as uncertainty from President Donald Trump’s year-long trade war with China.
Policymakers voted to lower benchmark borrowing rate by a quarter point to a range of 2% to 2.25% in a widely expected decision. The vote was 8-2, with Kansas City Fed President Esther George and Boston Fed President Eric Rosengren dissenting on the move. Both preferred no change.
“In light of the implications of global developments for the economic outlook as well as muted inflation pressures, the committee decided to lower the target range for the federal funds rate to 2-2.25 per cent,” the Federal Open Market Committee said in its policy statement.
The last time the central bank lowered interest rates was 2008, when the U.S. economy was in a mess. Jerome Powell, Chairman of the Board of Governors of the Federal Reserve System, held a news conference at around 2:30 p.m. ET to defend the central bank’s decision to lower borrowing rates.
The central banker said the rate cut was part of an ongoing move to adjust to economic conditions, but he did not guarantee that this was the start of a rate-cutting campaign. The rate cut comes after months of pressure from U.S. President Donald Trump, who has repeatedly attacked Fed officials for not doing enough to boost the economy.
Earlier this week, Trump blasted the central bank in a string of tweets, saying it “has made all of the wrong moves” and added that “a small rate cut is not enough.”
The Dow Jones Industrial Average closed at 26,882, lower by 325 points, or 1.2% after the rate cut. The Nasdaq fell 93 points, or 1.1% to close at 8,182, while the S&P 500 dropped 30 points, or 1%, to close at 2,983.
