Fundamental Comment

Federal Reserve cuts its interest rates by 25bp

Federal Reserve cuts its interest rates by 25bp

The Federal Reserve decided at its meeting on Wednesday to cut interest rates, as expected in the markets, by a quarter percentage point, as the Bank seeks to support growth rates and allow inflation to rise to the bank's target at 2%.

Interest rates were slashed by 25 basis points to 1.75% to 2.00% range, compared to the previous 2.00% to 2.25% range.

Since the central bank's last meeting in July, economic data continued to show strength in the labor market and the stability in unemployment rates at low levels, the Fed report showed.

MPC believes that the interest rate cuts serve the Fed's goals of supporting growth rates and stabilizing economic activity, especially in light of the uncertainty dominating the markets due to the trade war with China, while, on the other hand, would support inflation rates to reach the target at 2%.

The majority of bank members voted in favor of a rate cut, while bank member James Bullard voted to cut rates by 50 basis points, while Esther George and Eric Rosengren voted to hold rates.

However, the Federal Reserve cut their interest rates outlook for 2019 and 2020, and inflation expectations for the current and next year were set at 1.5% and 1.9% respectively.

Expectations for growth rose this year to 2.2% from 2.1% and stabilized in 2020 at 2%, and unemployment forecasts were raised to 3.7% from 3.6% in 2019.

The dollar rose against the major currencies after the Fed's decision, where the dollar index hit its highest level at 98.14 after opening today's trading at 97.51, as of 18:27 GMT.

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