FED DECISION: The U.S. Federal Reserve has voted to cut rates by 0.25%.
The Federal Reserve approved a much-anticipated quarter-point interest rate cut Wednesday but offered few indications that further reductions are ahead.
In addition to the reduction, the Fed cut the interest it pays on excess reserves by 30 basis points, greater than the funds rate cut, amid a breakdown this week in the overnight repo lending market. The move was aimed at keeping the funds rate within its target range; the IOER historically has acted as a guardrail for the funds rate, which traded 5 basis points above the target.
As for its economic assessment, the Fed tweaked language to indicate that household spending is "rising at a strong pace" while "business fixed investment and exports have weakened." However, the data has firmed up recently, and Fed Chairman Jerome Powell has held to his position that while the central bank will do what is needed to maintain the recovery, he views these cuts as a "mid-cycle adjustment" and not part of a more aggressive strategy to drive rates lower.
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