Fed is expected to cut interest rates again by quarter point

Federal Reserve cuts interest rates amid fears of global slowdown

The decision came after the U.S. Federal Reserve cut short-term interest rates by 0.25 percentage points to 1.75 to 2 percent Wednesday, following one in July, amid global fallout from the prolonged U.S.

And for Canadians waiting for lower rates, those same global forces are on their way, and will likely force Bank of Canada Governor Stephen Poloz to follow suit.

In a rare move, the Fed's own benchmark fed funds target rate rose to 2.3% on Tuesday, above the target range set when it cut rates at its last meeting in July... However, in a sign of ongoing divisions within the Fed, seven of 17 policymakers projected one more quarter-point rate cut in 2019.

Markets - which have been predicting a series of cuts and, until recently, expected a larger half point cut - tumbled on the news.

Two - Boston Fed President Eric Rosengren and Kansas City Fed President Esther George - who have both voiced concerns that the USA economy isn't in need of an extra boost from rate cuts.

Officials also left the door open for another rate cut this year, reinforcing the message by Fed Chairman Jerome Powell that policymakers would do whatever necessary to prevent a recession.

The president tweeted the Fed and its chair had failed, saying, "No "guts", no sense, no vision.". Otherwise, we may be nearing the lower bound of this so-called "mid-cycle adjustment".

However, the BoJ has been reluctant to add more stimulus, believing that most of its remaining policy options - such as deeper negative interest rates - would have unpleasant side effects and pose risks to financial stability.

"It is an unusual situation", Powell said. "The labour market is still strong".

Attack could cause spike in gas prices
But he stressed that military retaliation was not yet on the table in response to the strike against a key U.S. The State Department did not immediately respond to an after-hours email from Fox News on Tuesday morning.

There was little change in policymakers' projections for the economy, with GDP growth seen at a slightly higher 2.2 per cent this year and the unemployment rate to be 3.7 per cent through 2020. Going forward "we are going to be highly data-dependent" in deciding on further rate moves.

US stocks, lower ahead of the statement, dropped further, and Treasury yields ticked up from their lows of the day.

US interest rates and the dollar are stronger in large part because the American economy is performing better than other large advanced economies. They fell even faster when the Fed started to cut the size of its bond portfolio about two years later. And that means lower rates are coming to Canada too, he said.

Powell played down a disruption in short-term money markets this week, but the central bank then said it would pour another $75 billion USA into markets after banks had asked for more than $130 billion.

At a press conference following the Fed announcement, Powell was asked if Trump's criticisms were hurting morale at the central bank.

Separately, the Fed announced steps created to boost liquidity in short-term funding markets after the central bank was twice forced this week to inject cash into money markets to pull down interest rates. That was a view Powell was anxious to dispel. "Insurance" is a very broad scope and one day it is inflation, then it could be trade, then it could be domestic worries, and then it could be a worsening global outlook.

The exact cause of the squeeze is a matter of some debate, but most market participants agree two coincidental events on Monday were at least partly to blame.

Mr. Powell has said the Fed doesn't make policy decisions based on demands from political leaders and instead focuses on its congressional mandate to boost employment while keeping inflation stable.

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