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News Link • Central Banks/Banking

The Threat of Artificially Low Interest Rates

• by Pavel Mordasov

his month, under the guidance of Jerome Powell, the Federal Reserve announced it is cutting rates for the first time since the 2008 financial crisis. This rate cut of 25 basis points is a decline from 2.5 percent to 2.25 percent. Powell's reasoning for the rate cut was to provide a "mid-cycle adjustment" in an attempt to both stabilize the economy and create further growth in the market without facing the possibility of heading into a recession in response to weak global growth and trade policy uncertainty.

The Fed's decision to lower rates has received disdain from two Fed officials: Eric Rosengren, president of the Federal Reserve Bank of Boston, and Esther George, president of the Federal Reserve Bank of Kansas City, who wanted to keep the rates as is. Even President Trump, who has been an outspoken critic of the Fed raising rates too high since appointing Powell, was left unsatisfied even after getting his way with lower rates. 

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