In a widely telegraphed and, therefore, fully expected move, the Federal Reserve Board voted to reduce its federal funds rate target by another 25 basis points this afternoon. That was the second such rate cut in as many meetings and followed a decade in which there had been no reductions--only increases in 2017 and 2018.
However, the central bank did not signal that there would be additional rate action this year, which disappointed many traders and sent the stock market down sharply in the minutes following this rate move. In fact, after dawdling at modestly lower levels through the morning and early afternoon, the Dow Jones Industrial Average quickly fell to a session-worst 185-point setback.
In its interest-rate decision, the central bank pointed to the generally solid labor market and strong household spending activity. The Fed also cited continuing low inflation for its latest rate move, while not acknowledging that inflationary measures did pick up in August.
The vote, meantime, was split, with one Fed member calling for a 50-basis point move; two others again opining for no reduction; and the rest in line with the 25-point action. Finally, although the bank did not point to additional rate moves this year, it also did not close the books entirely on such action.
– Harvey S. Katz, CFA
At the time of this writing, the author did not have positions in any of the companies mentioned.
