“Since the decision to cut interest rates for the first time in the past 10 years at the end of July, the Fed has implemented the second rate cut this year,” CNN reported on the 18th that the Federal Reserve’s Federal Open Market Committee decided to cut interest rates again at the meeting held on the same day. Base point, the federal funds rate target range is lowered to 1.75% to 2%. The US “Wall Street Journal” said on the 18th that the purpose of the Fed’s interest rate cut is to provide a buffer for the US economy to cope with the impact of the global economic slowdown amplified by the Sino-US trade war.
Cut interest rates again by 25 basis points
The Associated Press reported on the 19th that the interest rate cut was basically in line with external expectations. Federal Reserve Chairman Powell said that if the US economy does not perform well in the future, the Fed may still cut interest rates again. At the same time, the Fed also needs to deal with the uncertainties brought about by the Sino-US trade war, the slowdown in world economic growth and the risks of poor US manufacturing performance.
After the Fed announced interest rate cuts on Wednesday, US stocks rebounded in late trading, but the fluctuations were not large. The Dow Jones index and the S&P 500 closed slightly higher, while the Nasdaq index closed down 0.11%. The price of gold, which has been strong for some time, has fluctuated drastically, and the US short-term bond yield and the US dollar index have risen. After the market opened on the 19th, the Asia-Pacific stock market generally closed up, with the Hong Kong Hang Seng Index down 1.06%.
As a preventive rate cut, the United States still has more opportunities to cut interest rates before the end of this year. Jamie Dimon, CEO of JPMorgan Chase, said that the interest rate cut has little impact on the US economy. Reducing interest rates alone will not eliminate the threat of trade wars to the global economy. The Associated Press said that although the US job market has stabilized recently, wages have risen, and industries such as manufacturing and construction have shown signs of rebound, but because of the uncertainty, no one can determine the direction of future interest rate policy.
The Fed’s internal differences are particularly
“This interest rate cut once again reveals that the Fed’s internal differences still exist.” The Wall Street Journal said that Fed officials have different views on the decision to cut interest rates and the prospect of further interest rate cuts. Of the 10 members of the Federal Open Market Committee with voting rights, 7 voted in favor of lowering the benchmark federal funds rate to between 1.75% and 2%. Two reserve bank governors tend to keep interest rates stable while another It tends to cut interest rates by 50 basis points.
Although the Fed’s interest rate cuts are in line with market expectations, Trump still expressed obvious dissatisfaction. On the 18th, Trump slammed Powell and the Fed on Twitter for “no courage, no common sense, no foresight.” Trump last week on Twitter called on the Fed to reduce interest rates to zero or even negative, saying that negative interest rates will save interest costs on government debt. He also emphasized that “the European trading power Germany is implementing negative interest rates.”
Some analysts said that if the Fed implements negative interest rates, it may create the next financial crisis, because the financing costs become lower, and people will bear more risks that they would not have assumed. The Washington Post previously said that considering Trump’s outstanding loans to hotels and resorts as real estate developers, Trump could save millions of dollars in interest each year if the Fed cuts interest rates.
According to a survey, a number of US CFOs predict that the US economy will fall into recession by the 2020 election. The US Business Insider website quoted the Duke Global Business Outlook report released by Duke University on the 18th as showing that US corporate optimism fell to the lowest level in three years. Most respondents believe that the US may experience a recession before the 2020 election. . The survey also found that corporate pessimism is rising, and 55% of CFOs’ pessimism in the third quarter was higher than in the second quarter. John Graham, a professor of finance at Duke University’s Fuqua School of Business, said: “Business optimism is low in all regions of the world, which exacerbates the possibility of a slowdown in the US economy.”
American structural problems are difficult to understand
The news that the Fed announced interest rate cuts also kicked off the “Super Thursday” central bank’s interest rate date. Following the Fed’s interest rate cut, four central banks in Brazil, Saudi Arabia, Jordan and the United Arab Emirates have “running” to follow up. The Hong Kong Monetary Authority has also followed the interest rate cut and lowered the benchmark lending rate by 25 basis points to 2.25%.
“This round of interest rate cuts is unlikely to solve the recession problem facing the US economy,” said He Zili, a professor at the School of Economics at Nankai University, who told the Global Times that “there is a serious structural problem in the US economy, such as severe de-industrialization, high economic virtualization, The polarization of income distribution, the large scale of the trade deficit, and the high government debts have led to the stagnation and recession of the US economy. The interest rate cut policy is a counter-cyclical measure and is incapable of solving structural problems.”
He said, “Trump’s provoked trade war with China is the trigger for this round of economic recession. Only by stopping the trade war and negotiating and negotiating under the principle of mutual respect and equality can we create a favorable environment for overcoming the economic recession. It is beneficial to boost the US economy.”