The Fed will cut rates for the first time in a decade this month


According to economists surveyed by Reuters, a quarter-point reduction in the Fed's interest rate is a "resolved issue", and another decline is expected this year amid growing economic risks as a result of the continuing trade war between the US and China. Easing policy will push US stocks to new record highs. More than 95% of 111 economists predict a rate cut of 25 basis points at the meeting of July 30-31. At the same time, the markets are already so confident in the Fed's decision that if this does not happen, it will cause some shock. Expectations for the Fed rate this year have changed dramatically - from a stable tightening to a series of cuts. Just a month ago, the US central bank still predicted the continuation of policy and possible easing next year. But now fears about the negative impact of a trade war, a slowdown in growth, as well as weak inflationary pressure are causing increasing concern.

The latest survey shows another rate cut in the last quarter, and almost 40% of respondents predict that another drop is likely to occur as early as September. In general, three rate reductions are expected this year - in July, September and December. "We do not think this is the beginning of a large-scale easing cycle; rather, these reductions are aimed at providing a little more opportunity to compensate for the headwind, "economist Josh Nay said. However, there is another opinion. "The problems that affect the economy and inflation right now will not solve lower rates. Economic prospects are overshadowed by trade tensions. Reducing rates by 25 or 50 basis points will not change this situation. From a fundamental point of view, this does not make sense," said analyst Thomas Simons.

The material has been provided by InstaForex Company -