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What the Fed rate cut means for the dollar

by LLB Editor
19th Sep 19 8:22 am

The US Federal Reserve last night cut rates by a quarter of a percentage point to between 1.75% and 2%.

Officials were divided about the decision and over the need for future cuts.

Seven members of the Federal Reserve Open Markets Committee, which sets the rates, voted in favour of Wednesday’s cut, including the chair Jerome (Jay) Powell.

Rajan Naik, Director of Financial Markets Online, commented: “Jerome Powell can barely get a break. Attacked by President Trump for not cutting rates far enough, and lambasted by the markets for giving scant future guidance, he knows better than anyone that the central banker’s task is often a thankless one.

“The irony is the Fed has played this one by the book. With global growth sputtering and no inflationary pressure to worry about, a gentle nudge on the monetary policy tiller was firmly baked into market expectations.

“Yet despite following that script to the letter, two things undermined Mr Powell’s calm and measured arguments. His insistence that future decisions will be “data dependent” smacks more of fudge than prudent bet hedging.

“And the divisions within the Fed’s rate-setting committee have burst into the open. With several members holding polar opposite views, the Fed’s avowed plan to keep cutting rates hangs in the balance.

“With the Fed’s next move fired up into the air, the Dollar is moving with it.”

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