US interest rates in times of Trade disputes


All expect, but the uncertainty is large. The American Central Bank, the Fed is likely to reduce yet on Wednesday the US fed funds rate. But that is the US economy really necessary and useful?

Clear expectations of the markets

The last reduction in the key interest rates by the Federal Reserve, the US Central Bank, the Fed, is no two months. And now all observers expect that Central Bank chief Jerome Powell and his colleagues this Wednesday the monetary policy key rate will be re-caps a quarter of a percentage point. Most recently, she had lowered the interest rates by the end of July, in the range of 2.0 to 2.25 percent.

More recently, Powell had kept in his public Statements covered: He suggested no concrete action on interest rates, but he said nothing, which would have shaken the expectation of the markets, according to a further interest rate reduction. Powell stated that the economy was more robust. The Central Bank is determined to ensure that the engine grunt more.

Actually, the US Central Bank has simply to ensure that the prices remain stable and unemployment low. So the American law. The American President wants much more. Donald Trump is hardly an opportunity to pass, by the independent – to challenge the Central Bank’s radical steps: they should drive interest rates to Zero or below to boost the economy, and thus he could reduce the debt of the United States. In the Rest of the Fed chief Powell was a “wood head”.

Jerome Powell, chief of the US Central Bank, the Fed

Low Inflation, long growth

You look at the hard facts, the Fed is hardly a reason to be active again, after they had been reduced in July to the first Time in eleven years, the key interest rate. The unemployment rate in the U.S. is 3.7 percent, the lowest since fifty years. The rate of inflation at around two percent, you find pretty much exactly where they should be for the Fed.

The key interest rate, called the Federal Funds Rate is the interest rate, to lend to the commercial banks overnight money. A reduction in the interest rate reduces the price of loans, which is why companies can invest in and many citizens have to spend less to service the debt – you have more income available.

In fact, there are some signs of problems that could have an impact on the consumption, and thus a main pillar of the US Economy. Although the economy is already growing for ten years, currently with around two per cent. It is the longest documented continuous recovery, but growth has slowed recently. President Donald Trump’s proposed arms trade war with China is weighing on the economy. Companies back to investments in certain industrial sites, employment in the factories is shrinking. The order books are small. Data from the bonds market led to a recession to fear, reported analysts.

Tired of American consumers?

“Tired Consumers”?

Also, there is the observer, the warning signs, clues, such as the rising share of consumer loans, which could no longer be supported. “The American Consumer is tired?”, also, the Economist Torsten Slok of Deutsche Bank in the “Frankfurter Allgemeine Zeitung asks”. Warning signals about the Fed: “We forecast and do not expect a recession,” said Powell at the beginning of September. At the same time, he acknowledged, however, that since the last Fed meeting in July, much had happened, what could have an impact on the economy.

Another Problem is that the level of interest rates has a direct effect, has the responsibility of President Trump, also to the strong increase in debt in the USA – and relates to the whole of the state debts as well as the current US budget. The Federal budget deficit has exceeded this year, the trillion-Dollar limit and is by 19 percent higher than a year ago. This deficit must be financed, and the interest rates play a role, even if for a more long-term.

US President, Trump has been rather short-term interests. In November of next year, new elections are due. And exploding debt and a weakening economy are not a good Argument in the election campaign.

ar/ku (dpa,rtr – archive)