In a latest development, the US Federal Reserve has lowered its interest rates by 25%, bringing out a sigh of relief for general public. With this move, people will be able to borrow money from banks via credit card, loans and auto financing in easy installments. Now the interest rate falls within the range of 4.50% to 4.75% after the cut of 25%. It should be noted that the US Federal Reserve started the process of decreasing interest rates in September as the inflation started to slow down. Before that, the interest rate peaked due to global inflation.
However, it is pertinent to mention here that Jerome Powell, the Federal Reserve Chair, stated that another interest rate cut of 25% could occur before 2025 if the current global economic condition remains steady and the trend persists. If that happens, the interest rate could fall to as low as 3.4% by the end of 2025, which will be a good sign for the developing world.
A statement released by the Federal Reserve Market Open Committee, reads, “Economic activity has continued to expand at a solid pace. Even while the unemployment rate remains low, “labor market conditions have generally eased.”
It should be noted that the decrease in interest rates has also been influenced from the Republican President-elect Donald Trump who campaigned on reducing tariffs to a minimum level and also doing crackdown on immigration which indirectly affects the economic landscape of a country.
The Fed Chair, Jerome Powell, stated, “We don’t guess, we don’t speculate, and we don’t assume. “We’re in the process of recalibrating from a fairly restricted level at 5.33 per cent. After today’s move, we’re down 75 basis points and we’re asking ourselves, is that where we need to be.”
Moreover, K Sean Clark, chief investment officer at Clark Capital Management Group, said, “On the margin, those additional rate cuts may be questioned given the prospects of additional tariffs, making prior tax cuts permanent, immigration restrictions, and fiscal spending on which Trump campaigned.”
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