Fed Cuts Rate Target for the First Time Since 2008

August 1, 2019
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The Federal Reserve confirmed its widely expected interest rate cut on Wednesday, but disappointed investors by not committing to more in 2019.

The quarter point decrease is the first since 2008, when the Fed set the target rate close to 0% with the financial crisis in full swing. Unlike that cut, yesterday’s one was not a move to bring the economy back from the brink of collapse. Instead, the Fed is aiming to extend one of the longest periods of economic expansion in America’s history.

As has been the case for much of Chairman Jerome Powell’s tenure, not everyone was pleased by the extremely hawkish announcement.

Here’s everything investors need to know.

President Trump Not Impressed by Hawkish Rate Cut

President Trump has placed pressure on the independent Fed, insisting that Jerome Powell should do more to sustain investment markets and the economy.

Trump told his Twitter followers: “What the Market wanted to hear from Jay Powell and the Federal Reserve was that this was the beginning of a lengthy and aggressive rate-cutting cycle which would keep pace with China, The European Union and other countries around the world. As usual, Powell let us down, but at least he is ending quantitative tightening, which shouldn’t have started in the first place – no inflation. We are winning anyway, but I am certainly not getting much help from the Federal Reserve!”

The President’s concerns echo those of many investors. While other major economies are slashing rates, the U.S. Federal Reserve is only easing them. Trump’s belief that there shouldn’t have been rate hikes in 2018 is shared by many across the nation.

Markets Finished Down After Fed Announcement

Powell is focused on long term performance rather than short term gains, and the Fed’s hawkish cut may turn out to be the best thing for sustained growth.

Even so, markets still fell on Wednesday, with investors disappointed that this will likely be the only rate cut of the year.

  • The Dow Jones Industrial Average (DJIA) was down -1.23% at the close of market.
  • The NASDAQ Composite (COMP) was down -1.19%.
  • The S&P 500 (SPX) was down -1.09%.

There’s a good chance that stocks will recover during Thursday trading. Even if the lackluster performance continues this week, there is a strong Wall Street opinion that the market rally will continue throughout summer.

Investors could even find this to be the perfect opportunity to pick up growth stocks at slightly lower prices. As usual, due diligence should be exercised for every stock, bond, or alternative investment purchase.

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