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Federal Reserve cuts interest rates by another quarter point

This is the third cut in 2019, bringing the policy rate to a target range of 1.50% to 1.75%

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Fed watchers expected the central bank would indicate it is holding off on further cuts for now

The Federal Reserve’s policy-setting committee on Wednesday cut interest rates by a quarter-point and indicated that it might pause on further easing.

The rate cut by the Federal Open Market Committee is the third this year, bringing the policy rate to a target range of 1.50% to 1.75%. 

Fed watchers had anticipated the rate cut and expected that the central bank would indicate it is holding off on further rate cuts as it watches for progress in the US economy and an easing of global tensions over trade and Brexit.

An important metric supporting a pause are US Treasury yields, which were higher this week. Yields edged up Wednesday following the release of the US third-quarter GDP report, which saw growth at 1.9%, better than the 1.6% expected. 

The Fed, however, must contend with widely divergent views on Wall Street over the direction of the economy. Some commentators expect no more rate cuts for the rest of the year; others think a recession is looming and the Fed will have no choice but to keep cutting rates, even down to zero.

Meanwhile, the fed funds futures market is pricing in about a 30% chance of a cut in December and more reductions next year.

The Fed kept its options open for its next rate-setting meeting in December, saying officials would continue to monitor economic developments, but language promising to "act as appropriate to sustain the expansion" was dropped, suggesting the Fed may not anticipate a need for a fourth rate cut later this year.

Following the Fed's decision, the DJIA recently traded up 29 points, or 0.11%, to 27,100.63.

--updates with Fed decision and Dow movement-- 

Contact the author: patrick@proactiveinvestors.com

Follow him on Twitter @PatrickMGraham

 

 

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