US Federal Reserve Cut – An overview and impacts
The federal reserve cut its Benchmark interest rate by 0.75% points on Tuesday. This is the highest single rate cut by the US fed in over 20 years.
Statement accompanied this decision is “in view of a weakening of the economic outlook and increasing downside risks to growth”.
Lowering interest rate is one tool available to central banks worldwide to modulate the impact of an impending slowdown. The magnitude of the rate cut clearly indicates the serious concerns in the US about the impact that the slowdown can have on the economy. In fact, going forward it is widely expected that the Fed will cut interest rates further by 50 basis point before pausing to take stock of the impact of these rate cuts.
It seems now clear that we are in for some interesting times. The unidirectional bull run in the global equity markets at least pausing for some time. On one other hand economic growth of countries like India is seriously affected by a slowdown in other major economies.
Statement accompanied this decision is “in view of a weakening of the economic outlook and increasing downside risks to growth”.
Lowering interest rate is one tool available to central banks worldwide to modulate the impact of an impending slowdown. The magnitude of the rate cut clearly indicates the serious concerns in the US about the impact that the slowdown can have on the economy. In fact, going forward it is widely expected that the Fed will cut interest rates further by 50 basis point before pausing to take stock of the impact of these rate cuts.
It seems now clear that we are in for some interesting times. The unidirectional bull run in the global equity markets at least pausing for some time. On one other hand economic growth of countries like India is seriously affected by a slowdown in other major economies.
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