The Fed is preparing to cut interest rates for the first time in ten years

For the first time since the recession more than ten years ago, the Federal Reserve is ready to cut interest rates in hopes of protecting its 11-year economic expansion against rising global uncertainty.

The central bank is expected to announce its decision on interest rates on Wednesday at ET.

The gradual decline in the federal fund's benchmark portfolio – economists expect the US central bank to lower it by a modest quarter percentage point – will end a time of monetary tightening by policy makers, who have voted nine times since 201[ads1]5 to raise interest rates, so as late as December.

"The next question is going to be, will there be further cuts after this?" said Josh Wright, chief economist at iCIMS and a former Fed staff. “I definitely think these numbers will make it very easy to say a finished one. We are doing well now, and now we have to let this cut through, so you are going to let it flow through and prevent any major development. "


The expected cut is likely to put President Trump, who often belittles the Fed, and its chairman, Jerome Powell, on raising rates too high, too quickly. On Tuesday, ahead The Federal Open Market Committee's two-day meeting, Trump repeated his criticism and asked the Fed to make a "big" interest rate cut.

"I want to see a big cut, and I would like to see the quantitative instant he said to reporters outside the White House.

But that is a pretty remarkable shift for what is typically considered a slow-moving regulatory body, and reverses years of slow but steady tightening. The Fed has not cut interest rates since 2008 , when it essentially cut interest rates to zero to cope with the fallout from the financial crisis, at that time GDP was -0.1 percent and unemployment was 6 percent.

In the second quarter of 2019, the country expanded by a 2, 1 percent annual rate – a healthy number, albeit slower than the last few years. Unemployment is still historically low at 3.7 per cent.

There are some persistent "unusual uncertainties" on the horizon, but Wright said, including the long-standing US-China trade war, concerns about softening growth in China and Brexit. [19659002] The interbank lending rate, which is currently set at a range between 2.25% and 2.50%, can affect consumers by lowering or increasing borrowing costs; which includes auto loan rates and 30-year fixed mortgage rates. Even a slightly lower interest rate for both can save consumers thousands of dollars.

Although the lending rate is the highest level this year, it is low by historical standards. But Fed officials say it's better to cut interest rates now to prevent a recession than to wait for a financial downturn.


Source link

Back to top button

mahjong slot