WEBVTT 00:02.466 --> 00:04.866 align:left position:10% line:71% size:80% JUDY WOODRUFF: The Federal Reserve cut a key short-term interest rate today, after raising 00:04.866 --> 00:07.000 align:left position:10% line:89% size:80% it as recently as December. 00:07.000 --> 00:09.066 align:left position:20% line:83% size:70% It lowered the federal funds rate. 00:09.066 --> 00:12.600 align:left position:10% line:77% size:80% - - that's the rate that banks charge each other for loans -- by a quarter-point. 00:12.600 --> 00:17.600 align:left position:10% line:77% size:80% Unusually, the stock market fell, apparently disappointed that Chairman Jay Powell did 00:19.066 --> 00:22.833 align:left position:10% line:83% size:80% not signal that this might be the first in a series of cuts. 00:22.833 --> 00:27.400 align:left position:20% line:77% size:70% Also unusual, two Fed committee members voted against today's move. 00:27.400 --> 00:30.266 align:left position:20% line:77% size:70% At a press conference, Powell played down the lack of consensus. 00:30.266 --> 00:33.800 align:left position:10% line:77% size:80% JEROME POWELL, Federal Reserve Chairman: There is a range of views on the committee, and 00:33.800 --> 00:38.766 align:left position:10% line:71% size:80% - - but the committee is unified, completely unified, on our dedication to making the best 00:40.966 --> 00:43.000 align:left position:10% line:89% size:80% policy decisions we can make. 00:43.000 --> 00:46.233 align:left position:10% line:77% size:80% And that means people have a responsibility to do their best thinking and to present that 00:46.233 --> 00:47.500 align:left position:30% line:89% size:60% thinking. 00:47.500 --> 00:49.433 align:left position:20% line:83% size:70% And I wouldn't have it any other way. 00:49.433 --> 00:51.533 align:left position:10% line:83% size:80% In terms of the way forward, we are going to be data-dependent. 00:51.533 --> 00:56.400 align:left position:10% line:77% size:80% We are going to be, as we always are, doing what we need to do, what we believe we need 00:59.533 --> 01:01.666 align:left position:20% line:83% size:70% to, to support the economic expansion. 01:01.666 --> 01:06.666 align:left position:10% line:77% size:80% JUDY WOODRUFF: Late this afternoon, President Trump also weighed in, tweeting that: "As 01:09.166 --> 01:12.466 align:left position:10% line:71% size:80% usual, Powell let us down," that markets were looking for indications of a lengthy and aggressive 01:13.200 --> 01:15.200 align:left position:20% line:89% size:70% rate-cutting cycle. 01:15.200 --> 01:18.200 align:left position:10% line:77% size:80% Today's rate cut marks the first time the Fed has lowered interest rates in a little 01:18.200 --> 01:20.166 align:left position:30% line:89% size:60% over 10 years. 01:20.166 --> 01:23.833 align:left position:10% line:77% size:80% At that time, the U.S. economy was struggling to emerge from the great recession. 01:23.833 --> 01:28.833 align:left position:10% line:71% size:80% Today, economic indicators are strong, unemployment is at a 50-year low, with the stock market 01:30.000 --> 01:32.066 align:left position:10% line:89% size:80% recently hitting new highs. 01:32.066 --> 01:34.100 align:left position:30% line:89% size:60% So why cut now? 01:34.100 --> 01:37.566 align:left position:10% line:77% size:80% For answers to that and more, we once again turn to David Wessel, director of the Hutchins 01:37.566 --> 01:41.633 align:left position:20% line:77% size:70% Center on Fiscal and Monetary Policy at the Brookings Institution. 01:41.633 --> 01:43.333 align:left position:20% line:83% size:70% David, welcome back to the program. 01:43.333 --> 01:45.466 align:left position:10% line:83% size:80% DAVID WESSEL, Brookings Institution: Good to be here. 01:45.466 --> 01:48.000 align:left position:10% line:77% size:80% JUDY WOODRUFF: So, as we just mentioned, last time we looked, in December, the Fed was raising 01:48.000 --> 01:49.133 align:left position:30% line:89% size:60% interest rates. 01:49.133 --> 01:50.300 align:left position:10% line:89% size:80% Now they're lowering them. 01:50.300 --> 01:51.300 align:left position:40% line:89% size:50% Why? 01:51.300 --> 01:52.300 align:left position:20% line:89% size:70% DAVID WESSEL: Right. 01:52.300 --> 01:53.600 align:left position:10% line:89% size:80% So, they gave three reasons. 01:53.600 --> 01:56.233 align:left position:20% line:83% size:70% One is that they made a mistake in December. 01:56.233 --> 01:59.233 align:left position:10% line:83% size:80% The economy isn't as strong as they had anticipated. 01:59.233 --> 02:02.166 align:left position:10% line:83% size:80% Two, they're worried that inflation is too soft. 02:02.166 --> 02:07.166 align:left position:10% line:77% size:80% They expected inflation to be moving towards their 2 percent target, and it hasn't moved 02:08.500 --> 02:10.033 align:left position:10% line:83% size:80% there quite as effectively as they had hoped. 02:10.033 --> 02:11.033 align:left position:20% line:83% size:70% JUDY WOODRUFF: That's prices going up. 02:11.033 --> 02:12.733 align:left position:10% line:89% size:80% DAVID WESSEL: Prices going up. 02:12.733 --> 02:15.200 align:left position:20% line:77% size:70% It's hard to believe, the Fed trying to get inflation going up. 02:15.200 --> 02:18.300 align:left position:10% line:83% size:80% For old-timers like us, that seems like an impossible thing. 02:18.300 --> 02:21.066 align:left position:20% line:83% size:70% Like, we're used to the Fed doing the opposite. 02:21.066 --> 02:25.100 align:left position:10% line:77% size:80% And the third thing is that they're really worried about risk to the global economy, 02:25.100 --> 02:29.800 align:left position:10% line:77% size:80% not so much the United States, but Chairman Powell mentioned China and Europe. 02:29.800 --> 02:34.800 align:left position:10% line:77% size:80% And he also made clear -- and he said this several times -- that trade tensions, President 02:36.766 --> 02:40.333 align:left position:10% line:77% size:80% Trump's trade war, is hurting the economy, largely because it's depressing business spirits 02:41.200 --> 02:43.200 align:left position:10% line:89% size:80% and business investments. 02:43.200 --> 02:46.533 align:left position:10% line:77% size:80% So, in a sense, they're saying, we need to cut rates now to protect the economy in part 02:48.433 --> 02:50.933 align:left position:10% line:77% size:80% from the damage that President Trump's trade policies are doing for the outlook. 02:50.933 --> 02:53.933 align:left position:10% line:71% size:80% JUDY WOODRUFF: So he's specifically pointing a finger at the president's trade policies? 02:53.933 --> 02:56.100 align:left position:20% line:77% size:70% DAVID WESSEL: He didn't quite say it like I did, but pretty close. 02:56.100 --> 03:00.966 align:left position:10% line:77% size:80% JUDY WOODRUFF: But cutting one-quarter of a point, it doesn't sound like a lot. 03:02.933 --> 03:05.433 align:left position:10% line:77% size:80% But what effect is that going to have on the economy and on ordinary Americans? 03:05.433 --> 03:07.533 align:left position:20% line:83% size:70% DAVID WESSEL: Well, it isn't a lot. 03:07.533 --> 03:11.300 align:left position:20% line:71% size:70% It's a small move, meant to offset some of the bad things that are going on in the economy. 03:11.300 --> 03:13.333 align:left position:20% line:83% size:70% The markets were anticipating this move. 03:13.333 --> 03:16.333 align:left position:10% line:83% size:80% So, for instance, mortgage rates have come down quite a bit. 03:16.333 --> 03:19.033 align:left position:10% line:83% size:80% Just a few months ago, mortgage rates were almost 5 percent. 03:19.033 --> 03:21.033 align:left position:20% line:89% size:70% Now they're 3.7 percent. 03:21.033 --> 03:24.333 align:left position:10% line:77% size:80% It will mean slightly lower rates on car loans, on some credit cards. 03:24.333 --> 03:28.933 align:left position:10% line:77% size:80% But it also means that people who are -- have money in a money market fund or in the bank 03:28.933 --> 03:31.000 align:left position:20% line:83% size:70% certificate of deposit will get less interest. 03:31.000 --> 03:33.433 align:left position:20% line:83% size:70% And that's, of course, frustrating to savers. 03:33.433 --> 03:37.266 align:left position:10% line:71% size:80% JUDY WOODRUFF: So President Trump being critical, because he says the Fed should have signaled 03:37.266 --> 03:40.033 align:left position:10% line:83% size:80% that there are going to be more rate cuts to come. 03:40.033 --> 03:42.066 align:left position:10% line:89% size:80% And the markets reacted to that. 03:42.066 --> 03:43.900 align:left position:20% line:83% size:70% Why didn't the Fed say more about that? 03:43.900 --> 03:46.433 align:left position:20% line:83% size:70% DAVID WESSEL: Well, I think you're right. 03:46.433 --> 03:50.233 align:left position:10% line:71% size:80% The markets seemed to have reacted to Chairman Powell's press conference, in which he refused 03:51.400 --> 03:53.500 align:left position:20% line:83% size:70% to say that this is a series of cuts. 03:53.500 --> 03:55.533 align:left position:10% line:89% size:80% He was a little confusing. 03:55.533 --> 04:00.500 align:left position:10% line:77% size:80% So I think that basically what the Fed is saying is, the economy is OK. 04:02.566 --> 04:05.733 align:left position:20% line:71% size:70% We -- this is taking out some insurance, just a little bit of insurance, against a bad outcome. 04:07.733 --> 04:10.466 align:left position:10% line:77% size:80% We will cut rates a lot if we think the economy is on the verge of the recession. 04:10.466 --> 04:12.033 align:left position:20% line:89% size:70% We don't think it is. 04:12.033 --> 04:14.333 align:left position:20% line:83% size:70% So this is not the first of a long series. 04:14.333 --> 04:17.433 align:left position:20% line:77% size:70% The markets still expect at least one more rate cut this year. 04:17.433 --> 04:19.500 align:left position:20% line:83% size:70% The president apparently wants more than that. 04:19.500 --> 04:23.833 align:left position:10% line:77% size:80% JUDY WOODRUFF: But they -- but, for whatever reasons, as you just said, the Fed is not 04:23.833 --> 04:25.100 align:left position:10% line:89% size:80% prepared to promise that. 04:25.100 --> 04:27.166 align:left position:20% line:89% size:70% DAVID WESSEL: No. 04:27.166 --> 04:31.100 align:left position:10% line:77% size:80% I mean, partly, it's because the markets and the analysts want more certainty, I think, 04:31.966 --> 04:34.100 align:left position:10% line:89% size:80% than the Fed can ever provide. 04:34.100 --> 04:36.866 align:left position:20% line:71% size:70% They don't really know -- and Chairman Powell talked about this -- how bad will trade tensions 04:36.866 --> 04:38.100 align:left position:20% line:89% size:70% be for the economy? 04:38.100 --> 04:40.166 align:left position:20% line:83% size:70% So they're trying to be cautious. 04:40.166 --> 04:44.633 align:left position:10% line:77% size:80% And, secondly, we are -- unemployment is at a 50-year low, and the economy is OK. 04:46.633 --> 04:50.000 align:left position:10% line:77% size:80% So the Fed doesn't believe it needs the really strong medicine of sharp rate cuts. 04:51.100 --> 04:53.233 align:left position:20% line:83% size:70% The president apparently feels differently. 04:53.233 --> 04:54.966 align:left position:10% line:77% size:80% JUDY WOODRUFF: Very quickly, David Wessel, another focus of the president seems to be 04:54.966 --> 04:56.700 align:left position:20% line:83% size:70% on the strength of the U.S. dollar. 04:56.700 --> 04:58.733 align:left position:10% line:89% size:80% How does all that play into it? 04:58.733 --> 05:01.300 align:left position:10% line:77% size:80% DAVID WESSEL: The president worries a lot about the dollar, which has been strong, because 05:01.300 --> 05:04.533 align:left position:10% line:83% size:80% it hurts our exports and makes trade deficits worse. 05:04.533 --> 05:06.600 align:left position:10% line:89% size:80% And that's a big concern of his. 05:06.600 --> 05:10.933 align:left position:20% line:71% size:70% The fact that other central banks around the world are cutting their interest rates means 05:10.933 --> 05:14.200 align:left position:10% line:83% size:80% that their currencies will fall relative to the dollar. 05:14.200 --> 05:18.566 align:left position:10% line:77% size:80% So one factor in the Fed's decision was, they knew that they had to cut rates now. 05:18.566 --> 05:20.500 align:left position:20% line:83% size:70% Otherwise, the dollar might get too strong. 05:20.500 --> 05:22.100 align:left position:20% line:83% size:70% And, apparently, they don't want that. 05:22.100 --> 05:23.600 align:left position:20% line:83% size:70% And the president surely doesn't. 05:23.600 --> 05:26.833 align:left position:10% line:83% size:80% JUDY WOODRUFF: Well, one more act in this drama that goes on. 05:26.833 --> 05:30.000 align:left position:20% line:89% size:70% We will keep watching. 05:30.000 --> 05:31.000 align:left position:10% line:89% size:80% DAVID WESSEL: Keeps me employed. 05:31.000 --> 05:32.233 align:left position:30% line:89% size:60% (LAUGHTER) 05:32.233 --> 05:33.166 align:left position:20% line:83% size:70% JUDY WOODRUFF: David Wessel, thank you. 05:33.166 --> 05:33.300 align:left position:10% line:89% size:80% DAVID WESSEL: You're welcome.