Asian Equities Recoil at Trump's Confrontational Tone Around US-China Trade Imbalance

Dump These Dow Stocks When the Fed Cuts Rates Wednesday CNBC Report

The Federal Reserve cut interest rates on Wednesday to shore up the economy against risks including global weakness, but the head of the US central bank said he did not view the move as the start of a lengthy series of rate cuts.

Stocks tumbled soon after the Fed issued its statement at 2:00pm (US eastern time).

In a much anticipated, live-streamed announcement today, Fed chair Jerome Powell said it is cutting the interest rate by 25 basis points, or 0.25%.

The central bank cut rates for the first time since the 2008 crisis, in what market observers interpreted as an "insurance policy" to guard against a deeper downturn.

Powell has asserted that Trump's pressure has had no effect on the rate policies of the Fed, which is considered an independent agency.

Many of these former officials say it would be wise to stimulate the USA economy with slightly lower rates to try to counteract the negative effects of Trump's trade war and weak growth overseas.

The move is seen as an early bid to prevent a downturn in the USA economy that forecasters say will result from Trump's trade war with China.

The Fed also chose to end its balance sheet asset sales prior to its previous September target date.

Now, even though the Fed has clearly signaled that rate cuts are coming - a message that has rallied the stock market - President Trump has intensified his public attacks, charging that the central bank and Powell, his hand-picked chairman, are mismanaging the economy.

With economic growth cooling off a bit, (2.1% GDP growth in the second quarter, the weakest since the first quarter of 2017, when Trump took office, ) there is a risk that things will slow down. That group includes two current FOMC voters, Kansas City's Esther George and Boston's Eric Rosengren, so resistance could spur two dissents.

The goal of the expected cut - the first in more than a decade - is to make borrowing less costly for consumers and businesses, encouraging spending and bolstering the economy. The reasons for the expected rate cut are "uncertainty around global growth and persistently low inflation".

The central bank hopes the rate cut will counter threats to the USA economy ranging from uncertainties caused by the nation's trade disputes to chronically low inflation and a dimming global growth outlook. The Dollar's gains have been reinforced by United States economic fundamentals, given the still-healthy consumer spending levels while inflation is ticking towards the Fed's two percent target.

The cut was opposed by two members of the Fed's Open Markets Committee, the body responsible for setting rates.

The U.S. dollar index.DXY gained ground to touch its highest in more than two years. As a result, a Fed rate cut will likely be passed along to vehicle buyers within weeks, Rick says.

Powell and other Fed officials in recent weeks have walked a middle ground, flagging risks such as low inflation, a weakening world economy and continued uncertainty on the global trade front. At the same time, a measure of business in the Chicago region fell this month to the lowest since late 2015. It also signaled a readiness to lower borrowing costs further if needed. The hope is that the slight rate cut will increase inflation and offset some of the impacts the trade war with China has had on skittish companies.



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