The US Federal Reserve cut its key interest rate by 25 basis points to a range of 1.75% to 2% early Thursday, Sydney time but left some confusion in markets as the key policy-making board split on the decision.
The Open Markets Committee split 7-3 in favour of a cut, but one of the three wanted a cut of half a percent, and the remaining two wanted no cut.
The split saw shares and bonds sold off, though Wall Street steadied in the final half-hour of trading and the Dow and the S&p 500 edged back into positive territory.
The Fed’s decision brought another ill-tempered reaction from Donald Trump who criticised the decision and Fed chair, Jay Powell in a tweet, saying “Jay Powell and the Federal Reserve Fail Again. No “guts,” no sense, no vision! A terrible communicator!”
Analysts took the split vote and small changes in the language of the final statement as suggesting the rate-cutting will stop there for the time being. The latest cut in the Federal Funds Rate was the second this year.
The cut was in line with the expectations of investors and economists, but the Fed’s projections showed a more hawkish line than markets had anticipated.
The median forecast among its rate-setting committee was that rates would be at the same level at the end of 2020. Futures data suggest that investors had expected two more cuts by the end of next year.
In its post-meeting statement, The Fed noted that business investment and exports had weakened, but repeated early comments that it would “act as appropriate to sustain the expansion”. That wasn’t enough for Donald Trump who unleashed his latest tweeter tirade.
