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2019 ж. 31 years. күні жарияланды
In this video, we'll see why the Federal Reserve has cut interest rates, even as the US economy is doing well.
The Federal Reserve has recently announced a reduction in interest rates, the first time since 2008. The rate cuts usually coincide with some kind of economic weakness, making the Fed's recent decision a little unusual.
The last time the Fed started a rate reduction cycle was during the Great Recession. By that time, unemployment had started to climb and there were major signs that the economy was beginning to deteriorate.
For example, housing prices had already fallen considerably when the Fed took its first steps.
But the Fed's recent rate cuts come at a time when US GDP growth is strong and the stock market is reaching unprecedented highs. In addition, the unemployment rate in the United States is currently 3.7%, which is extremely low in a historical context.
So why did the Federal Reserve reduce interest rates this time around?
To understand why a rate cut is logical this time around, it's important to understand that the Fed has a dual mandate: the first is to maximize employment and the second is to keep inflation at a minimum. desirable level.
With an unemployment rate of about 3.7% currently, employment is already maximized. However, inflation has been extremely low – well below the Fed's target rate of 2%.
Which means that it is clearly established that it is in the interest of the economy to help support the current expansion by reducing rates.
In addition, global economic growth has begun to slow, and the ongoing trade war between the United States and China is creating a high level of caution among policymakers.
Some experts believe that the Fed could proceed with several rate cuts in order to reach its inflation target.
The bottom line is that the US economy is strong, but the global economy is not as strong as the Fed would like to see. Lower interest rates should help inflation recover and allow the US economy to continue to grow.
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