The Federal Reserve Lowers The Fed Funds Rate to A 1.50% to 1.75% Target
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The Federal Reserve Lowers The Fed Funds Rate to A 1.50% to 1.75% Target

The Federal Reserve moved to lower the Fed Funds target rate today by 25 basis points to a range of 1.50% to 1.75%.

This move marks the third rate cut this year.

The Federal Reserve has now "reversed" three of its four hikes from 2019. This latest move was widely expected, and many banks have already lowered yields on savings accounts and CDs. Borrowings costs - such as those on new home equity loans and variable home equity lines of credit and on auto loans - will edge lower.

The Federal Reserve claims to be making this cut in order to respond to business developments and a slowdown in exports. Inflation remains below the Fed's 2% target, allowing the target to be lowered without jeopardizing price stability.

In the Fed’s language, it now say that the Federal Reserve will monitor incoming information as it assesses the appropriate path for the Fed funds rate going forward. This change in language could be taken to indicate that these three rate cuts have been a typical mid-cycle adjustment that has now reached its end.

Clearly Jerome Powell and his colleagues have been motivated to make this mid-course correction to appease a President trying to help his real estate buddies and to proactively address a rate curve inversion. Barring a dramatic and pronounced turn towards a recession, the Fed’s next move should come in 2020 and be to increase rates in order to normalize the cost of capital.

Ari Socolow
Ari Socolow: Ari Socolow is the Chief Economist and Editor-in-Chief at BestCashCow. He is particularly interested in issues relating to bank transparency and the climate crisis. Since co-founding BestCashCow in 2005, Ari has been frequently cited in the media as an expert on local and national savings accounts, CD products, mortgage and loan products and credit card rewards products.

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