JUDY WOODRUFF: The
Federal Reserve cut a
key short-term interest
rate today, after raising

it as recently as December.

It lowered the
federal funds rate.

- - that's the rate that
banks charge each other for
loans -- by a quarter-point.

Unusually, the stock market
fell, apparently disappointed
that Chairman Jay Powell did

not signal that this might be
the first in a series of cuts.

Also unusual, two Fed
committee members voted
against today's move.

At a press conference,
Powell played down
the lack of consensus.

JEROME POWELL, Federal Reserve
Chairman: There is a range of
views on the committee, and

- - but the committee
is unified, completely
unified, on our dedication
to making the best

policy decisions we can make.

And that means people have a
responsibility to do their best
thinking and to present that

thinking.

And I wouldn't have
it any other way.

In terms of the way forward, we
are going to be data-dependent.

We are going to be, as we
always are, doing what we need
to do, what we believe we need

to, to support the
economic expansion.

JUDY WOODRUFF: Late this
afternoon, President Trump also
weighed in, tweeting that: "As

usual, Powell let us
down," that markets were
looking for indications of
a lengthy and aggressive

rate-cutting cycle.

Today's rate cut marks the
first time the Fed has lowered
interest rates in a little

over 10 years.

At that time, the U.S. economy
was struggling to emerge
from the great recession.

Today, economic indicators
are strong, unemployment
is at a 50-year low,
with the stock market

recently hitting new highs.

So why cut now?

For answers to that and more,
we once again turn to David
Wessel, director of the Hutchins

Center on Fiscal and
Monetary Policy at the
Brookings Institution.

David, welcome back
to the program.

DAVID WESSEL, Brookings
Institution: Good to be here.

JUDY WOODRUFF: So, as we just
mentioned, last time we looked,
in December, the Fed was raising

interest rates.

Now they're lowering them.

Why?

DAVID WESSEL: Right.

So, they gave three reasons.

One is that they made
a mistake in December.

The economy isn't as strong
as they had anticipated.

Two, they're worried that
inflation is too soft.

They expected inflation to be
moving towards their 2 percent
target, and it hasn't moved

there quite as effectively
as they had hoped.

JUDY WOODRUFF: That's
prices going up.

DAVID WESSEL: Prices going up.

It's hard to believe,
the Fed trying to get
inflation going up.

For old-timers like us, that
seems like an impossible thing.

Like, we're used to the
Fed doing the opposite.

And the third thing is that
they're really worried about
risk to the global economy,

not so much the United
States, but Chairman Powell
mentioned China and Europe.

And he also made clear -- and
he said this several times --
that trade tensions, President

Trump's trade war, is hurting
the economy, largely because
it's depressing business spirits

and business investments.

So, in a sense, they're saying,
we need to cut rates now to
protect the economy in part

from the damage that President
Trump's trade policies
are doing for the outlook.

JUDY WOODRUFF: So he's
specifically pointing a
finger at the president's
trade policies?

DAVID WESSEL: He didn't
quite say it like I
did, but pretty close.

JUDY WOODRUFF: But cutting
one-quarter of a point, it
doesn't sound like a lot.

But what effect is that
going to have on the economy
and on ordinary Americans?

DAVID WESSEL: Well,
it isn't a lot.

It's a small move, meant
to offset some of the
bad things that are
going on in the economy.

The markets were
anticipating this move.

So, for instance, mortgage rates
have come down quite a bit.

Just a few months ago, mortgage
rates were almost 5 percent.

Now they're 3.7 percent.

It will mean slightly
lower rates on car loans,
on some credit cards.

But it also means that people
who are -- have money in a
money market fund or in the bank

certificate of deposit
will get less interest.

And that's, of course,
frustrating to savers.

JUDY WOODRUFF: So President
Trump being critical,
because he says the Fed
should have signaled

that there are going to
be more rate cuts to come.

And the markets reacted to that.

Why didn't the Fed
say more about that?

DAVID WESSEL: Well,
I think you're right.

The markets seemed to
have reacted to Chairman
Powell's press conference,
in which he refused

to say that this is
a series of cuts.

He was a little confusing.

So I think that basically
what the Fed is saying
is, the economy is OK.

We -- this is taking out
some insurance, just a
little bit of insurance,
against a bad outcome.

We will cut rates a lot if
we think the economy is on
the verge of the recession.

We don't think it is.

So this is not the
first of a long series.

The markets still
expect at least one
more rate cut this year.

The president apparently
wants more than that.

JUDY WOODRUFF: But they --
but, for whatever reasons, as
you just said, the Fed is not

prepared to promise that.

DAVID WESSEL: No.

I mean, partly, it's because
the markets and the analysts
want more certainty, I think,

than the Fed can ever provide.

They don't really know
-- and Chairman Powell
talked about this -- how
bad will trade tensions

be for the economy?

So they're trying
to be cautious.

And, secondly, we are --
unemployment is at a 50-year
low, and the economy is OK.

So the Fed doesn't believe
it needs the really strong
medicine of sharp rate cuts.

The president apparently
feels differently.

JUDY WOODRUFF: Very quickly,
David Wessel, another focus
of the president seems to be

on the strength of
the U.S. dollar.

How does all that play into it?

DAVID WESSEL: The president
worries a lot about the dollar,
which has been strong, because

it hurts our exports and
makes trade deficits worse.

And that's a big concern of his.

The fact that other
central banks around the
world are cutting their
interest rates means

that their currencies will
fall relative to the dollar.

So one factor in the Fed's
decision was, they knew that
they had to cut rates now.

Otherwise, the dollar
might get too strong.

And, apparently,
they don't want that.

And the president
surely doesn't.

JUDY WOODRUFF: Well, one more
act in this drama that goes on.

We will keep watching.

DAVID WESSEL: Keeps me employed.

(LAUGHTER)

JUDY WOODRUFF: David
Wessel, thank you.

DAVID WESSEL: You're welcome.