Will The Fed Lower Interest Rates Again?

Updated Dec 2020

Having already implemented two interest rate cuts this year, the Federal Reserve finds itself at a juncture where the next viable option, should rates be lowered further, is the adoption of negative rates. With the heightened concerns stemming from the coronavirus pandemic, the possibility of negative rates remains a distinct and significant consideration. In such a scenario, savers would face punitive consequences while speculators would reap the rewards..

“The Committee stated that it intends to maintain the current target range until it is confident in the economy’s resilience to recent events and its trajectory towards achieving maximum employment and price stability,” the Federal Reserve announced in a statement.

Numerous economists criticized the former Federal Reserve Chair, Yellen, and her deputy, Fischer, for raising interest rates prematurely during a period when the labour market was still recovering and there was room for further reduction in unemployment. This was particularly notable as inflation remained historically low, indicating minimal drawbacks to low-interest rates. While the risk of inflation has traditionally been a downside to low rates, as witnessed in the late 1970s, the United States has not experienced such a reality for several decades.

In an unconventional move, the current Fed chair, Jay Powell, opted to decrease rates even amidst an economic expansion, reasoning that the labour market had the potential for further improvement. This approach likely contributed to a reduction in unemployment and has not resulted in any negative consequences on inflation. . Full Story

Will The Fed Lower Interest Rates again: Update May 2020

How to play the coronavirus Pandemic

As a market crash is inevitable, so is an enormous recovery; the recovery phase is stronger and more rewarding than the crash phase. But the masses will never focus on this; they will focus on how the market could trend lower, why it’s not the right time to buy yet, or why it’s different this time and a host of other rubbish that makes no sense. And when the markets eventually surge to new highs, these penguins will look back in horror at how they did exactly what they promised never to do again. The sad part is that they will make the same promise again and react in the same manner; insanity is doing the same thing repeatedly while promising never to repeat the process.

As lower rates punish savers and individuals on a fixed income, these individuals will be forced to speculate and, as such, as we expect the markets. Hence the stock market is projected to trend upwards. So the best way to answer the “will the Fed lower interest rates again question” is to state that there is a strong possibility that they could do so.