This is Mary Walden with economist MW welcoming you to the economic perspective. Today’s program asks, is it time to cut. Mike, the policies of the Federal Reserve affect all of us, by impacting the interest rates we pay or receive and our ability to obtain credit. Recently the Federal Reserve made a significant shift in their interest rate policy, and now there’s speculation they may make another move. So what’s up – or down – with the Fed?
Mike: Summary Answer
- For several years after the Great Recession the Fed was raising interest rates from the zero level – as expected
- Earlier this year the Fed announced it would pause after evaluating that economic growth has slowed
- Now, with more signs of a slowdown – and with the fears of a long term trade war with China – the Fed has said it will do whatever it takes to keep the economic recovery going
- Many interpreted this to mean a reduction in interest rates
- Idea would be to reduce rates, make borrowing cheaper, to encourage spending and keep growth going
- Interesting aspect is that the Fed’s rate is only 2.5% — much, much lower than the starting point of previous rate cuts
- But inflation is very low, and other interest rates have deeply dropped
- I’m MW
And I’m Mary Walden for the Economic Perspective, an NC State Extension program from the Department of Agricultural and Resource Economics.