Federal Reserve cuts interest rates by quarter of percentage point

The rate cut will directly affect people’s mortgages, car payments and the economy in general.
5:15 | 09/18/19

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Transcript for Federal Reserve cuts interest rates by quarter of percentage point
My colleagues at the at the Federal Reserve and I are dedicated to serving the American people. We do this by steadfastly pursuing the goals congress has given us maximum employment and stable prices. We are committed to making the best decisions we can based on facts and objective analysis. Today we decided to lower interest rates. As I will explain shortly we took this step to help keep the US economy strong. In the face of some notable developments and to provide insurance against ongoing risks. The US economy has continued to perform well we are into the eleventh year of this economic expansion. In the baseline outlook remains favorable. The economy grew at a two and a half percent pace in the first test half of the year. Household spending supported by a strong job market rising incomes and solid consumer confidence. Has been the key driver of growth. He contrast. Business investment X and exports have weakened amid falling manufacturing output. The main reasons appear to be slower growth abroad and trade policy developments to sources of uncertainty that we've been monitoring all year. Since the middle of last year global growth the global growth outlook has weakened notably in Europe and China. Additionally a number of geopolitical risks including bricks at remain on resolved. Trade policies tensions have waxed and waned and elevated uncertainty is weighing on US investment and exports. Our business contacts around the country have been telling us that uncertainty about trade policy has discouraged them from investing in their businesses. Business fixed investment posted a modest decline in the second quarter and recent indicators point to continued softness. Even so with household spending remaining on a solid footing and with support of financial conditions. We expect the economy to continue to expand at a moderate rate. As seen from FOMC participants most recent projections the median expectation for real. GDP growth remains near 2% this year and next. Before edging down toward its estimated longer run value. The job market remains strong the unemployment rate has been near half century year flows for a year and a half. And job gains have remained solid in recent months. The pace of job gains has eased this year but we had expected some slowing after last year's strong pace. Participation in the labor force by people in their prime working years has been increasing. And wages have been rising particularly for lower paying jobs. People who live and work in low and middle income communities tell us that many who have struggled to find work. Are now getting opportunities to add new and better chapters to their lives. This underscores for us the importance of sustaining expansion. So that the strong job market reaches more of those left behind. We expect the job markets remain strong. The median of participants projections for the unemployment rate remains below 4% over the next several years. Inflation continues to run below are symmetric 2% objective. Over the twelve months through July. Total PCE inflation was one point 4% and core inflation. Which excludes volatile food and energy prices was one point 6% and eaten. We still expect inflation to rise to 2% the median projection is one point 9% this year and 2% in 2002 when he won. However. Inflation pressures clearly remain muted and indicators of longer term inflation expectations are at the lower and other historical ranges. We're mindful that continued below target inflation. Could lead to an unwelcome downward slide it in longer term inflation expectations. Overall as we say in our post meeting statement we continue to see sustained expansion of economic activity strong labor market conditions. And inflation near or some. Or 2% objective as most likely. While this has been our outlook for quite some time. Our views about the path of interest rates that will best achieve these outcomes have changed significantly over the past year. As I mentioned weakness in global growth and trade policy and certainly have weighed on me and economy and pose ongoing risks. These factors in conjunction with muted inflation for pressures. Have led us to shift a reviews about appropriate monetary policy over time. Toward a lower pass for the federal funds rate and this shift has supported the outlook. Of course this is the role monetary policy. To adjust interest rates to maintain a strong labor market and keep inflation there are 2% objective. Today's decision to lower the federal funds rate target by a quarter percent to one point. 75% to 2% is appropriate in light of the global developments I mentioned as well as muted inflation pressures. Since our last meeting we've seen additional signs of weakness abroad in a resurgence of trade policy tensions including the imposition of additional tariffs. The Fed has no role in the formulation of trade policy but we do take into account anything that could materially affect the economy relative to our employment inflation goals.

This transcript has been automatically generated and may not be 100% accurate.

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