The US Federal Reserve on 18 September cut interest rates by a quarter of a percentage point for the second time this year. The move is aimed at sustaining a decade-long economic expansion. The central bank also widened the gap between the interest it pays banks on excess reserves and the top of its policy rate range to tackle problems in money markets.

In lowering the benchmark overnight lending rate to a range of 1.75 per cent to 2 per cent, the Fed's policy-setting committee nodded to ongoing global risks and ‘weakened’ business investment and exports.

The Fed was cutting rates ‘in light of the implications of global developments for the economic outlook as well as muted inflation pressures’, it said in its policy statement.

With continued growth and strong hiring ‘the most likely outcomes’," the Fed cited ‘uncertainties’ about the outlook and pledged to ‘act as appropriate’ to sustain the expansion, according to global newswires.

There was little change in policymakers' projections for the economy, with growth seen at a slightly higher 2.2 per cent this year and the unemployment rate to be 3.7 per cent through 2020. Inflation is projected to be 1.5 per cent for the year, below the Fed's 2 per cent target, before rising to 1.9 per cent next year.

The rate cut fell short of the more aggressive reduction in borrowing costs that President Donald Trump had demanded from Fed officials, whom he has insulted as ‘boneheads’ who have put the economic recovery in jeopardy.

The Fed also cut rates in July, the first such move since 2008. Fed officials said the rate cuts are justified largely because of risks raised by Trump's trade war with China, a global economic slowdown and other overseas developments. (DS)

Fibre2Fashion News Desk – India

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