No need for the year's third interest-rate cut in the US

The US Federal Reserve delivered America's third, and probably final, interest rate cut of the year last week.

The US Federal Reserve delivered its third, and probably final, interest rate cut of the year last week. The quarter-point reduction means that borrowing costs in the world's largest economy now sit between 1.5% and 1.75%.

Quite why an economy at "full employment, chugging along at its sustainable growth rate of about 2%" needs a rate cut escapes me, says Irwin Stelzer in The Sunday Times. Fed chairman Jerome Powell worries that bad manufacturing data shows that the economy is slowing, but "free-spending" consumers (who after all account for around 70% of the economy) are keeping things ticking along just fine. At least Powell indicated that "that's it for this year and probably next".

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It will take a "horror show" for Powell to cut rates further, agrees John Authers on Bloomberg. The Fed says the cuts are insurance against a slump but that it does not anticipate a recession. Those expecting further rate cuts from here are betting that a recession is around the corner.

The S&P 500 and Nasdaq indices both recently stormed to all-time highs, notes Liam Halligan in The Sunday Telegraph. The emergency measures of the financial crisis ultra-low rates and monetary expansion have since become "lifestyle choices" for big-money interests and profligate governments alike. Yet the needless cuts ensure that "when the next crisis comes, even the mighty Fed will have almost no scope to respond".


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