Serj Panchuk
The U.S. Federal Reserve is reported to have cut the key interest rate, which is something really outstanding since the Fed has done it for the first time since 2009.
Market leader experts report that any changes in interest rate cuts mean changes in the national economy. To be more specific, depending on the direction and the degree of the change, you can tell how good or bad the things are in the national economy at a given point. Back to the Federal Reserve, this time the regulator has cut the interest rate by as much as 0,5% at a time, while usually, this is a 0,25% change if any.
The thing is that the USA has been involved in a series of trade wars with other major economies. In particular, the United States has been exchanging duties and other pleasant surprises with China and the European Union. This makes the Fed worry about a possible economic slowdown in the USA and the entire world.
Previously, the Fed used to stick to the policy of gradually increasing the interest rates even though President Trump was against this policy and criticized the Fed severely for that. Back in late 2018, the interest rate was increased from 2,25% up to 2,5%, which was the 4th interest rate hike in 2018.
For those of you who don't know, higher interest rates lead to more expensive loans while interest rate cuts make those loans cheaper. The current interest rate decision made by the regulator may well enliven the lending market, which is something the Fed is really hoping for. American businesses have now gained access to cheaper loans, which is expected to lead to a production boost and expansion., which in their turn lead to more taxes and new jobs.
At the same time, Washington claims that the overall economic situation in the country is good. The U.S. GDP gained 3,7% in Q1 2019, with 2% inflation and record-low unemployment (lowest in 50 years). With that being said, the latest interest rate cut is a preventive step.
The U.S. economy is still the world's biggest economy, with the U.S. Dollar still playing the key role in the global economy, trade, and finances.
Serj Panchuk
