The Federal Reserve on Wednesday cut interest rates for the third time this year, as expected, in a move to ensure the U.S. economy weathers a global trade war without slipping into a recession, but it  signaled that its rate-cut cycle might be at a pause. 
 
In lowering its policy rate by a quarter of a percentage point to a target range of between 1.50% and 1.75%, the U.S. central bank dropped a previous reference in its policy statement that it “will act as appropriate” to sustain the economic expansion — language that was considered a sign of future rate cuts. 
 
Instead, the Fed said it would “monitor the implications of incoming information for the economic outlook as it assesses the appropriate path” of its target interest rate, a less decisive phrase. 
 
Kansas City Fed President Esther George and Boston Fed President Eric Rosengren dissented from the decision. They have opposed all three Fed rate cuts this year as unnecessary. 

View of economy changes little
 
The Fed’s description of the U.S. economy on Wednesday remained largely unchanged, with labor markets said to be “strong” and economic activity “rising at a moderate rate.” 
 
As in its previous policy statement, the Fed said it took the action to reduce borrowing costs “in light of the implications of global developments for the economic outlook as well as muted inflation pressures.” 
 
The Fed said business investment and exports remained “weak.” 
 
Expectations for additional cuts after October have diminished significantly in recent weeks. 
 
U.S. stocks, down modestly before the Fed’s statement, pared some of their losses and were little changed on the day. The benchmark S&P 500 Index, which had hit a record high earlier in the week, was down fractionally. 
 
Bond yields also showed little reaction, with the 10-year Treasury note yield at 1.80%, down about 3 basis points on the day. The dollar edged up to the day’s high against a basket of the currencies of top U.S. trading partners. 
 
“It’s pretty much what was expected,” said Jim Powers, director of investment research at Delegate Advisors. “The more important outcome is they removed the phrase ‘act as appropriate.’ It looks like the market is taking that to mean that there will be a pause in the declining rate path they were on beforehand. That’s what was expected, and that’s generally a good thing.” 

Unusual situation
 
The central bank and U.S. economy are at an unusual juncture. 
 
Unemployment is near a 50-year low, inflation is moderate, and data earlier on Wednesday showed gross domestic product grew at an annual rate of 1.9% in the third quarter, a slowdown from the first half of the year but not as sharp a decline as many economists had expected and some Fed officials had feared. 
 
But parts of the economy, particularly manufacturing, have stuttered in recent months as the global economy slowed. 
 
Businesses have pared investment in response to the U.S.-China trade war that both raised tariffs on many goods and made the world a riskier place in which to make long-term commitments. 
 
While that has not had an obvious impact yet on U.S. hiring or consumer spending, Fed officials felt a round of “insurance” rate cuts was appropriate to guard against a worse outcome. The Fed cut rates in July and again in September, and by doing so hoped to encourage businesses and consumers with more affordable borrowing costs. 
 
The approach was successful in the 1990s when risks developed during another prolonged period of economic growth. 

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