The Federal Reserve announced an interest rate cut of 25 basis points on Wednesday, bringing the rates to a range or 1.75 to 2 percent, in a move that was meant to sustain the country’s long period of economic growth. U.S. President Donald Trump, however, was not happy with the announcement, criticizing Powell for having “no ‘guts,’ no sense, no vision!” and for being a “terrible communicator.” Trump went on to criticize the Fed for keeping interest rates at a level which will risk U.S. competitiveness with the rest of the world.
Trump’s comments came after Powell said that future interest rate cuts, if there are any, will be based upon data, not upon a current long-term plan.
Following the Fed’s two-day policy meeting, the Fed’s ‘dot plot’ showed that the 17-member central bank was split on how interest rates should be managed, with five members voting against Wednesday’s rate cut, five expecting yesterday’s cut to be the last one of 2019, and seven forecasting one more rate cut before the end of the year.
In other news out of the U.S. on Wednesday, reports from the Commerce Department showed that future home construction levels in August hit levels not seen since 2007, prompted by the lower mortgage rates that have made building more affordable. This data, in conjunction with strong retail sales data in August, paints a fairly stable picture of the U.S. economy and calls into question whether the current period of economic expansion is actually coming to an end as analysts originally worried after the yield curve inversions seen a few weeks ago.
The U.S. housing market hadn’t reacted as strongly as expected to the Fed’s monetary easing policy thus far, which some analysts have blamed on land and labor shortages. But this week’s data showed that this weakness may be ending and that there is renewed confidence for the housing market. Still, President Trump’s tariffs on Chinese goods are likely to counteract the benefits of lower borrowing costs by raising materials costs.
The dollar index declined 0.10 percent in the early Asian afternoon on Thursday after holding steady on Wednesday. The greenback slumped against the yen, easing 0.53 percent to 107.87 as of 1:20 p.m. HK/SIN. It was also lower against the British pound and the euro, where it was trading at $1.2472 and $1.1037 respectively. The dollar did manage to gain against the Canadian and Australian dollars.