For the second time this year and for the second time in three months, the Federal Reserve is cutting interest rates. The interest rate was cut by 2 percent, an increase of .25 percent from the previous interest rate of 1.75 percent. The Federal Reserve hopes that by cutting interest rates, they can artificially stimulate the economy.
The economy is in a bull market, and the Fed hopes that it can keep it this way by cutting interest rates. By lowering the interest rate, the Fed can encourage people to borrow and invest their money. It has been ten years since the last recession, and some economists are starting to fear that another recession is on the horizon. They are displaying a lack of faith in the economy remaining in a bull market.
Part of the reason as to why the Fed decided to cut interest rates was because of slowing economic growth in other nations and the ongoing trade war with China. The Fed has failed to get inflation up to its targeted 2 percent goal. This failure means that the Fed has less room to cut interest rates if the economy went into a bear market.
The Fed has faced criticism from President Trump, who has pushed for the Fed to further lower the interest rates. Trump has also criticized the Fed, claiming that having high interest rates hurts American competitiveness against other nations economically. It remains to be seen whether cutting interest rates will successfully stimulate the economy enough to prevent a recession in the near future, unlike the last time when interest rates being cut ended up further fueling the Great Recession.
