America’s central bankers widely expected to cut interest rates come Wednesday
The US Federal Reserve will meet today in Washington, where it is expected to lower interest rates into the 1.5% to 1.75% range.
This year, in the face of the trade war with China, the Fed has slashed rates on three separate occasions to encourage investment. Policymakers have mirrored rate cuts from other economies, such as Japan and the EU, to keep the US as a competitive option for investment.
The likelihood for the ending of the rate cut policy, commonly referred to as the midcycle adjustment, is attributed to two things: the status of trade negotiations with China and the ramifications of keeping the rate low.
China recently lifted tariffs on multiple US agricultural products, including soybeans, and there is momentum for a new set of talks. Thus, the US might want to end rate cuts to indicate that it is not aggressively competing with China for investment due to the trade war.
In addition, an extended period of low rates can indicate economic turbulence and a shortage of investment. Thus, expect Chairman Jerome Powell to qualify previous statements that the Fed will continue to sustain expansion by cutting rates.
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