The Federal Reserve announced Wednesday that it will lower interest rates by a quarter of a percent in response to a cooling economy mitigated by weak business investment and exports.
At the conclusion of its meeting on Oct. 30, the Federal Open Market Committee voted to lower its target rate range to 1.50% – 1.75%, the third cut this year.
“Business investment and exports remain weak, and manufacturing output has declined over the past year,” Federal Reserve Chairman Jerome Powell said during a press conference following the meeting.
According to data released by the U.S. Department of Commerce on Wednesday, business investment has contracted for the last two quarters, dropping around 3% since March.
The chairman also said weakening global growth and trade conflicts have weighed on the economy and pose ongoing risks.
However, Powell noted that recent discussions between the U.S. and China to normalize trade relations could be enough to inflate commercial activity. “That would bode well, we think, for business confidence,” he said.
Additionally, the decreased likelihood of a “no-deal” Brexit could help remove some uncertainty in the global economy.
Despite declining business investment, Powell said consumer activity remains strong, driven by an equally sturdy unemployment rate that continues at 50-year lows. “That is the thing that’s pushing the economy forward and it doesn’t seem to have been affected, so far, by weakness in the other areas,” he added.
The last FOMC meeting, in September, saw the highest level of discord among its members since 2016, with three voting against the cut.
At the end of the meeting this week, two of the committee’s 10 members voted against the measure to cut interest rates, instead recommending that the Fed maintain rates at their previous target. It was the fourth consecutive session without a unanimous vote.
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Benjamin Glick is ACG Global’s marketing and communications associate.