President Donald Trump renewed his scathing attacks on the US Federal Reserve late this evening after its chair downplayed the chances of a lengthy series of rate cuts.
The central bank lowered its main federal funds target rate by 25 basis points (0.25 percentage points) to between two and 2.25 per cent tonight, marking the first time that interest rates have been cut since the financial crisis.
However, Fed chair Jerome Powell described the move as “a mid-cycle adjustment to policy,” suggesting that sharp further cuts were unlikely.
The comments prompted anger from Trump, a fierce critic of Powell who has urged the Fed to ease monetary policy and claimed that its actions in the past have undermined his economic and trade policies.
“What the market wanted to hear from Jay Powell and the Federal Reserve was that this was the beginning of a lengthy and aggressive rate-cutting cycle which would keep pace with China, The European Union and other countries around the world,” the President tweeted.
He said that Powell “let us down”, adding that his administration was “certainly not getting much help from the Federal Reserve!”.
Ahead of Trump’s attack Powell told reporters “we never take into account political considerations” – a reference to Trump’s repeated criticism of the Fed’s policy.
The tussle is likely to inflame tensions between the two sides, which have been suffering strained relations in an unprecedented political situation that has called into question the central bank’s independence.
Muted US inflation and signs of slowing growth was cited by the Fed today for its widely-expected cut, which will make borrowing cheaper in the world’s largest economy.
Powell said that the “performance of the economy has been reasonably good”, but flagged trade tensions and weak manufacturing for the cut.
A normally consensus-driven approach among the committee was shaken up by dissent from two of the Fed’s 10 rate-setters, who both argued for leaving interest rates unchanged.
Traders had largely priced in the probability of a 25 basis point cut, though a minority had expected a deeper cut of 50 basis points.