Powell takes cue from Greenspan in Fed interest rate cut
WASHINGTON In cutting US interest rates but signalling that a series of further cuts was unlikely, Federal Reserve chairman Jerome Powell on Wednesday took a page from the playbook of his predecessor Alan Greenspan, who used a similar tactic in the 1990s with apparent success.
Rather than marking the start to a lengthy rate-cutting cycle, Mr Powell said at a news conference after the decision that the Fed's quarter-point rate reduction was an "adjustment" aimed at keeping the US economy's record-long expansion going.
"There is definitely an insurance aspect to it," said Mr Powell, echoing the phrasing that the Greenspan Fed used to describe its monetary policy easing in 1995 and in 1998.
The reference may not have been coincidental. Since becoming Fed chair in February last year, Mr Powell has met at least a dozen times with former Fed officials, according to records on Mr Powell's daily activities released by the Fed, but no one more frequently than Mr Greenspan. The two last met on April 17, sharing a 75-minute lunch.
And though US President Donald Trump complained the Fed had "let us down" by delivering only a limited dose of stimulus, the economic record shows that both times the Greenspan Fed tried insurance cuts, they worked.
In July 1995, industrial production and job creation were slowing and new unemployment claims were rising.
Though Fed policymakers at the time did not believe the data meant a recession was coming, they did not wait to find out.
They cut rates three times, and the manufacturing and job market both regained health.
This time around, Mr Powell faces a different set of challenges, including an inflation rate that remains stubbornly south of the Fed's targeted level of 2 per cent and sudden swings in trade policy.- REUTERS