— This is the script of CNBC's news report for China's CCTV on October 31, 2019, Thursday.
The third rate cut since late July, was broadly in line with market expectations. the market took note of an important change in the fed's decision statement, it replaces" act as appropriate' to sustain expansion" with "the Committee will continue to monitor the implications of incoming information for the economic outlook as it assesses the appropriate path of the target range for the federal funds rate". It was interpreted by the market as a signal that the fed might stop there and not seek further rate cuts.
Fed chairman Colin Powell offered a clearer explanation at a news conference after the meeting, saying he thought the fed's current stance on monetary policy was appropriate.
Chair of the Federal Reserve
"We see the current stance of monetary policy as likely to remain appropriate as long as incoming information about the state of the economy remains broadly consistent with our outlook," he told reporters at his post-meeting news conference.
However, he clearly left room for further policy changes, saying the fed would act if future economic data led to a material change in its assessment of the outlook for the US economy.
The main reason for the rate cut remains a safety plan against risk
Powell said that some of the risks that have unnerved fed officials appear to have receded in recent weeks, trade relations between the United States and China have moderated and the possibility of Britain leaving the European Union without a deal has greatly decreased.
In its assessment of the current state of the U.S. economy, the fed said information indicated a modest expansion in U.S. economic activity.
With household spending grew strongly, but business investment in fixed assets and exports remained weak, while headline and core inflation, excluding food and energy prices, remained below 2%.
Inflation data is a key reference in the fed's monetary policy decisions, Powell emphasized that Any future rate increase must be based on sustained and steady inflation, that means we need to wait for a long time for the next round of rate rise and the monetary policy will remain loose for some time. That falls short of Trump's demands, but is still enough to support the US stock market. After the federal reserve announced its interest rate decision and Powell's speech, We saw all the major U.S. stock indexes close higher, and the s&p 500 hit another record high.
It comes at an unusual time for the U.S. economy, with preliminary data from the Commerce Department on Wednesday showing GDP growth slowed to 1.9 percent in the third quarter as business investment and consumer spending fell.
Although the fed's monetary policy has supported the stock market, some analysts believe that interest rate cuts have not given the economy as much of a boost as before, how will the fed respond to this? On the other hand, what impact will the fed have on other central banks' decisions after signaling a pause in rate cuts? We will keep eyes on these issues.