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Fed cuts rates again, may pause for a while

While the US central bank cut rate for the third time, the latest GDP data showed the US economy continued to grow in the third quarter but at a slower pace.

Centtrip: Measure twice, cut once?

The Federal Open Market Committee (FOMC) cut an interest rate for the third time this year by quarter of a per cent to 1.75 per cent. Federal Reserve Chair Jerome Powell withdrew a pledge from September that the Fed would “act appropriate to sustain the expansion”, hitting the pause button on any further changes to the interest rate.

Powell suggested that the latest cut was “insurance against ongoing risks”, leaving the Fed in wait-and-see mode unless economic data deteriorates or improves further. He added that a “broad reduction” in trade tensions between the US and China would be positive for the US economy but this would not warrant further rate raises in the short term.

Earlier in the day, the US Department of Commerce reported that GDP growth slowed in the third quarter of this year but less than expected. GDP grew at 1.9 per cent on an annualised basis, down from 2 per cent in the second quarter, but far better than the 1.6 per cent that economists expected.

However, the cut was widely expected, as was the reaction from US President Donald Trump who has been a fierce critic of Powell and believes that the interest rate should be closer to zero for US corporations to remain competitive.

The release weakened the Dollar against its peers, with the Euro trading above €1.1150, its highest level for over a week, and the Pound climbing back above $1.2900.

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