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Mohammed al-Menshawi, Washington
The global economic situation is contrasted with the Federal Reserve's decision to reduce interest rates by a quarter of a percentage point, for the first time since October 2008, in a range of 2% to 2%. , 25%.
Less than a day later, US President Donald Trump announced the introduction of tariffs on more than 300 billion dollars of Chinese imports.
Al Jazeera Net tries to explain these developments in the form of questions and answers.
What do interest rate cuts mean in the United States after 11 years?
As expected, the Federal Reserve's decision to reduce interest rates by 25 basis points (one-quarter percent) was the first interest rate cut for more than a year. ten years, no reduction having been recorded since 2008.
Why lower interest rates?
The US Federal Reserve confirms that its decision to cut interest rates is in no way related to the political rhetoric or positions of President Donald Trump.
Trump attacked the council for failing to take action to reduce rates quickly.
Many experts attribute this decision to uncertainty over global growth and persistent low interest rates that prompted Fed Chairman Jerome Powell to cut interest rates.
Despite the overall improvement in the US economy, particularly in terms of unemployment and income from the equity and bond markets, the US economy is slowing growth.
The US economy grew only 2.1% in the last quarter, down from 3.1% in 2018.
The interest rate cut is a preventative measure that reflects the major concern over the growth rates of the global economy and the continued low inflation.
How did Trump react to the decision to cut?
Trump said the Fed chairman "let us down" by cutting interest rates by just a quarter of a percentage point and said the market was waiting for a further decline.
"What the market wanted the board of directors to hear is that it's the beginning of a long and aggressive cycle of interest rate cuts that will be put in place." in place for China, the EU and other countries of the world, "said Trump in a tweet just hours after the council statement.
| Trump attacked the US central bank for not making the decision to lower rates quickly (Reuters) |
What impacts on the financial and labor sector in the United States?
The reduction in interest rates has frustrated investors and US capital markets and some will likely see this reduction taking place "in the middle of the monetary policy cycle" and not at the beginning of a new cycle.
"There is probably at least another reduction," Jerome Powell said at a press conference following the Federal Reserve meeting.
The Standard & Poor's 500 and Dow Jones indexes posted the largest decline in overnight trading in the past two months after Wednesday's decline, Reuters reported.
What about the impact of the reduction on the American consumer?
The reduction decision means a reduction in interest rates on auto loans or credit cards.
As for mortgage interest rates linked to government bond prices, they should not go down.
US consumer spending accounts for two-thirds of the country's economy. Expenses are now high and should not increase.
What can improve is the investment rate of US companies and increased spending, and more Americans will see the benefits of the economic improvement that their country has experienced over the last decade.
What impacts on the global economy?
The global economy is witnessing a slowdown similar to that of its US counterpart, and the US Reserve Bank is closely monitoring the stages and positions of central banks around the world.
According to Bloomberg, many financial experts in emerging market countries believe the Fed's decision is somewhat negative for developing country badets, baduring traders that interest rates in the United States will not be affected. declines, which could reduce the transfer of investments from US badets. To emerging market badets.
What is the relationship between the reduction of interest rates in the trade war between Washington and Beijing?
Most economists do not believe that there is a direct link between US interest rate cuts and the trade war between the United States and Beijing.
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