If the U.S. economy is in good shape, why is the Federal Reserve cutting interest rates?

The Federal Reserve did something Wednesday that it hasn’t done in more than a decade: cut interest rates. The question on a lot of people’s minds is why.

Lowering interest rates, the Fed’s main way to boost the economy, is typically used in dire times, which it’s difficult to argue the United States is experiencing right now. Instead, top Fed officials are defending this as an “insurance cut” that’s akin to an immunization shot in the arm. They want to counteract the negative effects of President Trump’s trade war and prevent the United States from catching the same cold that Europe, China and elsewhere seem to have.

The Fed’s announced a quarter-point cut a widely expected move to lower the benchmark U.S. interest rate from about 2.5 percent down to just shy of 2.25 percent. But the Fed seldom does just one cut, which is why Trump, Wall Street and much of the world will be listening closely to Powell for signs of when another cut is likely.

View the complete July 31 article by Heather Long on The Washington Post website here.