US Federal Reserve cuts key interest rates for second time this year

The dollar rallied on the widely expected cut and US stocks continued to slump

FILE PHOTO: Federal Reserve Board building on Constitution Avenue is pictured in Washington, U.S., March 19, 2019. REUTERS/Leah Millis/File Photo
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The US Federal Reserve has announced it is cutting rates for a second time this year and says it is committed to doing what’s necessary to sustain US economic growth.

The widely expected cut of 25 basis points will reduce the Fed’s benchmark rate by an additional quarter-point to a range of 1.75 per cent to 2 per cent.

The Federal Reserve cited a strong labour market and rising economic activity in a statement announcing the move.

Following the announcement, US President Donald Trump ripped into the Federal Reserve, saying its quarter point rate cut was still not enough.

"Jay Powell and the Federal Reserve Fail Again. No 'guts,' no sense, no vision! A terrible communicator!" Trump tweeted.

Trump has heaped unprecedented political pressure on the central bank and Powell in particular through repeated angry statements and sometimes crude insults about the policy makers' intelligence.

The president argues that interest rates should have been cut long ago and should now be reduced sharply to compete with other countries that have lower rates.

With continued economic growth and strong hiring "the most likely outcomes," the Fed nevertheless cited "uncertainties" about the outlook and pledged to "act as appropriate" to sustain the expansion.

Expectations of lower rates have supported Wall Street's rally this year, with the benchmark S&P 500 now about 1 per cent below its record high close in July.

At 2.03pm ET, the Dow Jones Industrial Average was down 0.28 per cent at 27,035.09 points, while the S&P 500 lost 0.40 per cent and dropped to 2,993.59.

The Nasdaq Composite dropped 0.71 per cent to 8,128.16.

Ahead of the Fed's announcement, the S&P 500 had been down about 0.3 per cent.

The US economy is in its 11th year of growth, with a still-solid job market and steady consumer spending.

But the Fed is trying to combat threats including uncertainties caused by President Donald Trump's trade war with China, slower global growth and a slump in American manufacturing.

The Fed notes in its statement that "business fixed investment and exports have weakened."

The move was approved on a 7-3 vote, with two officials arguing to keep rates unchanged and 1 arguing for a bigger half-point cut.

It was the largest number of Fed dissents in three years.