Looming Economic Slowdown Likely to Force FED to Cut Interest Rates

Over the course of the year, the global economy has given even indications that a slowdown might be looming and naturally, central banks have been urged to cut interests in order to stimulate growth. Many central banks across the world have cut interest rates. Last time around, the United States Federal Reserve did the same. However, over the past few weeks, there has been a lot of clamors to cut interest rates in the last round as well, and according to reports, the Federal Reserve is apparently going to oblige. The global economy is not in great shape at this point in time due to a number of factors and recent events in Saudi Arabia have added to the uncertainties. The trade war between the United States and China has resulted in turmoil in the markets for many months now.

On the other hand, the drone attack on the oil facilities in Saudi Arabia last Saturday has knocked off a large percentage of the global oil supply and injected more uncertainty into the global economic landscape. Due to such incidence in the global economic situation at this point, it is now highly likely that the FED is going to cut interest rates further this week. FED rate cuts are quite rare nowadays, and back in July, the interest rates were cut marginally for the first time in 10 years. The short term range at the time was kept in the 2% to 2.25% range. Economists had earlier stated that a rate cut was unlikely due to the resumption of trade talks and stabilization in oil prices. However, that is no longer the case, and there is a lot of uncertainty in the market at this point.

In addition to that, the head of the FED Jeremy Powell has been attacked relentlessly by the United States President Donald Trump over the past week for not cutting the interest rates sufficiently. As a matter of fact, in some of his tirades on Twitter, Trump had attacked both the policymakers at the FED and the head of the institution as well. For instance, in one of his tweets, he had called Powell, an ‘enemy’. That being said, the reasons for a rate cut now go beyond the tirades of the President, and if it is cut then the global economic situations are going to be the main reason.