WASHINGTON (CN) – The Federal Reserve cut interest rates Wednesday for the second time in as many months in an effort to continue the longest economic expansion on record amid President Donald Trump’s trade war and fears of a global slowdown.
In late July, the central bank announced the first cut in more than a decade to its benchmark short-term rate, which influences consumer and business loans from mortgages to credit cards and home equity lines of credit.
The benchmark rate range was set to 2% to 2.25%, but Wednesday’s cut pushed it further down to a range of 1.75% to 2%.
The Fed noted in a statement Wednesday that business investment and exports weakened over the summer, and “measures of longer-term inflation expectations are little changed.”
“In light of the implications of global developments for the economic outlook as well as muted inflation pressures, the committee decided to lower the target range for the federal funds rate to 1-3/4 to 2 percent. 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.
The vote was 7-3. Two commissioners voted to keep rates the same and another wanted a larger half-point cut.
Economists predict one or two more rate cuts from the Fed this year. Inflation has consistently stayed below the central bank’s 2% annual target, as the U.S. economy marked a record 10 straight years of expansion in July.
The low inflation, Trump’s trade war with China and global uncertainties – such as the fallout from attacks on Saudi Arabia oil facilities – are behind the rate cuts.
Trump has repeatedly blasted Federal Reserve Chairman Jerome Powell in recent months and called for the benchmark rate to drop to zero.
“The USA should always be paying the lowest rate. No Inflation! It is only the naïveté of Jay Powell and the Federal Reserve that doesn’t allow us to do what other countries are already doing. A once in a lifetime opportunity that we are missing because of ‘Boneheads,’” the president tweeted last week.
It remains to be seen how the rate cuts will affect the economy, as trade talks between Washington and Beijing are set to resume next month. The tariffs on Chinese imports and counter-tariffs on U.S. exports are hurting some American businesses and complicating their plans for the future.
Most analysts do not expect a new trade agreement to be finalized this year.
Another issue raising concerns about a global slowdown is Britain’s impending Oct. 31 withdrawal from the European Union. A no-deal Brexit could destabilize European markets and affect the U.S. economy.