US Fed Cuts Key Interest Rate Again

The US Federal Reserve cut its benchmark interest rate for the second time this year on Wednesday but the policy committee is divided, with three of the 10 voting members dissenting.

The central bank also moved to ease concerns about a cash crunch on financial markets by adjusting its key policy tool to help pump more funds through the financial plumbing.

The Fed's policy-setting Federal Open Market Committee lowered the policy interest rate by 25 basis points to a target range of 1.75 to 2.0 per cent, as expected, and has now pulled back on half of the four interest rate increases in 2018.

"Although household spending has been rising at a strong pace, business fixed investment and exports have weakened," the committee said in a statement.

And while officials continue to believe the most likely outcome is for the economy to continue to grow and inflation to gradually increase, "uncertainties about this outlook remain."

US Federal Reserve chairman Jerome Powell and other Fed officials have frequently cited the uncertainty generated by US President Donald Trump's trade war with China which is hanging over the economy.

The Fed also cut the interest it pays to banks on cash reserves above the required level by 30 basis points to 1.8 per cent, in a bid to push more cash into markets.

A cash shortage in recent days prompted the New York Fed on Tuesday and Wednesday to pump US$128 billion in funds into the short-term market as interest rates soared and threatened to break out of the Fed's target range. (AFP)