Page 4 The Skanner Portland & Seattle MINORITY BUSINESS ENTERPRISE EDITION September 18, 2019
MBE 2019
Events
& Announcements
Special Business Edition
With Trump Trade War a Threat, Fed is Set to Cut Rates Again
By Martin Crutsinger
AP Economics Writer
WASHINGTON — For
a second straight time,
the Federal Reserve is set
to cut interest rates this
week to try to protect
the economy from the
consequences of a global
slowdown and President
Donald Trump’s trade
war with China.
After that, no one —
not even the Fed itself —
seems sure what it will
do. The economic land-
scape looks too hazy and
vulnerable to unexpect-
ed events, like oil price
spikes resulting from the
weekend attack on Saudi
Arabia’s oil production
facilities.
Among the key ques-
tions:
Will Trump achieve
at least a truce in his
conflict with China and
diminish a threat over-
hanging the U.S. econo-
my?
Will Britain avoid a dis-
ruptive exit from the Eu-
ropean Union that would
destabilize the global
economy?
Is U.S. inflation, dor-
mant for years, finally
starting to reach the lev-
el the Fed has long target-
ed? Could a surge in oil
prices even send infla-
tion to heights that would
make the Fed uncomfort-
able about cutting rates?
Or would higher energy
prices make the officials
more fearful of a global
downturn and so more
inclined to cut rates?
The answers to those
uncertainties will influ-
ence the Fed’s decisions
in the coming months
on whether it needs to
keep reducing borrow-
ing rates to try to help
sustain the U.S. economic
expansion now in its 11th
year.
It might not matter
much in any case. With
rates already ultra-low,
few economists think a
further modest drop in
borrowing costs would
provide much econom-
ic stimulus. Still, the
financial markets are
anticipating not only a
quarter-point rate cut
on Wednesday when the
Fed ends its latest policy
meeting but one or more
additional cuts later this
year.
Since the Fed’s last
AP PHOTO/MANUEL BALCE CENETA, FILE
Feds are unsure what they will do, but think a drop in borrowing costs would provide economic stimulus
In this July 31 file photo Federal Reserve Chairman Jerome Powell
speaks during a news conference following a two-day Federal Open
Market Committee meeting in Washington. Federal Reserve Chairman
Jerome Powell said Sept. 6 that the Fed is not expecting a U.S. or
global recession. But it is monitoring a number of uncertainties,
including trade conflicts, and will “act as appropriate to sustain the
expansion.”
meeting ended July 31,
the markets have en-
dured a tumultuous ride.
On that day, it announced
its first rate cut in more
than a decade — since the
eruption of the financial
crisis in 2008. In explain-
ing its move to cut its
key short-term rate to a
range of 2% to 2.25%, the
Fed cited the weakening
international economy,
uncertainties
height-
ened by Trump’s trade
fights and chronically
low inflation. It cast its
action as a pre-emptive
move to sustain the ex-
pansion.
Yet the very next day,
Trump sent markets
plunging when he an-
nounced a new round of
penalty tariffs against
China. Around the same
time, he also stepped up
his public attacks on the
Fed and on Chairman
Jerome Powell person-
ally. By the time Powell
addressed an annual
Fed conference in Jack-
son Hole, Wyoming, in
late August, Trump was
tweeting that the man he
had chosen to lead Amer-
ica’s central bank was an
“enemy” of the United
States to rival China’s
President Xi Jinping.
Trump’s sniping at the
Powell Fed hasn’t let up.
He has demanded larger
and larger rate cuts. Last
week, he insisted that the
Fed should cut its bench-
mark rate to zero — or
below, as the European
Central Bank has done.
Nearly all economists
outside the administra-
tion view that idea as un-
wise if not reckless. Neg-
ative rates tend to reflect
severe economic weak-
ness — something not
characteristic of the U.S.
economy, with its slow
but steady growth, solid
consumer spending and
an unemployment rate
near a half-century low.
The most serious threat
to the expansion is wide-
ly seen as Trump’s own
trade war. The increased
import taxes he has im-
posed on goods from
China and Europe — and
the counter-tariffs other
nations have imposed on
U.S. exports — have hurt
American
companies
and paralyzed plans for
investment and expan-
sion.
And despite Trump’s
insistence that the Fed
aggressively slash what
are already historically
low interest rates, few
businesses feel that bor-
rowing rates are too high
or that they can’t obtain
loans.
“When we talk to our
businesses — and it
doesn’t matter the sector,
it doesn’t matter the size,
it doesn’t matter their
geographic location —
what’s driving their con-
cern is uncertainty in the
policymaking process,
especially with respect to
tariffs,” said Neil Bradley,
executive vice president
of the U.S. Chamber of
Commerce.
In recent days, the
Trump administration
and Beijing have acted
to de-escalate tensions
before a new round of
trade talks planned for
October in Washington.
Yet most analysts foresee
no significant agreement
emerging this fall in the
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