Publications

- September 1, 2019: Vol. 31, Number 8

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Fed cuts target rate by a quarter point

by Loretta Clodfelter

The Federal Open Market Committee decided to lower the target federal funds rate by 25 basis points to a range of 2.0–2.25 percent following its meeting July 30–31. It was the first cut in rates since the global financial crisis. A key explanation for shifting the rate downward is “the implications of global developments for the economic outlook as well as muted inflation pressures,” according to a statement from the committee. Such global developments include the economic effects of tariffs and trade wars.

The committee also expressed concern regarding the growth of business fixed investment, which it described as “soft.” The advance estimate for GDP growth in the second quarter, released last week by the Bureau of Economic Analysis, indicates U.S. real GDP increased at an annual rate of 2.1 percent — lower than the 3.1 percent figure in the first quarter. GDP growth slowed in the second quarter, driven by downturns in inventory investment, exports and nonresid

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