(CN) – The Federal Reserve lowered interest rates Wednesday for the first time since the start of the recession more than a decade ago, based on perceived threats to the economy including trade wars, lagging inflation and global growth fears.
In its first rate cut since December 2008, the central bank announced a quarter-point cut in the benchmark short-term rate, which influences consumer and business loans from mortgages to credit cards and home equity lines of credit.
Dropping from a range of 2.25% to 2.5%, it is now between 2% and 2.25%.
The decision, made in an 8-2 vote, was based on “the implications of global developments for the economic outlook as well as muted inflation pressures,” the Fed said in a statement.
“This action supports the committee’s view that sustained expansion of economic activity, strong labor market conditions, and inflation near the committee’s symmetric 2 percent objective are the most likely outcomes, but uncertainties about this outlook remain,” the central bank said.
Chairman Jerome Powell said in a press conference Wednesday afternoon that the central bank was not planning to issue a series of rate cuts, but didn’t rule out additional cuts.
“I didn’t say it’s just one or anything like that,” he said, adding that Wednesday’s decision was not about sustaining growth rather than reviving a weakening economy.
Stocks tumbled soon after the announcement, with the Dow Jones Industrial Average down about 300 points Wednesday afternoon. Investors were likely disappointed by Powell not projecting multiple rate cuts.
Wednesday’s cut was widely expected, even after the Fed declined last month to lower rates. It said at the time that it would “act as appropriate to sustain the expansion,” now in a record 10th consecutive year, as economic uncertainties arise.
The ongoing trade war with China has deepened concerns about an economic slowdown in the U.S. and in global markets, and inflation has stayed below the Fed’s 2% annual target.
President Donald Trump and others had called for a rate cut to promote economic growth.
The Commerce Department announced last week that the growth in the gross domestic product, a primary indicator of economic health, dropped to 2.1% in the second quarter, down from 3.1% in the January-March quarter.
Economists expect yearly growth of about 2.5% in 2019, down from 2.9% last year.
The Trump administration had been projecting annual GDP growth of about 3%, which would be well above the 2.2% average annual rate seen during the current economic expansion.