I have a legitimate question this evening. Why doesn’t public enemy #1 want to lower interest rates?

I mean, if it’s good for the economy (per Trump) why doesn’t he just do it?

And how low can the Feds lower the interest rates? Is 1% a good thing?

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quitwhendone · M

Interest rates are part of monetary policy set by a nation's central bank. It's used to control inflation and provide liquidity as needed. At present, the Federal Reserve Bank Chairman and its Board of Governors believe that adequate liquidity is being provided by the current Federal Funds rate (the interest rate banks charge other banks) and inflation can best be kept in check at the current rate. Being that the economy is currently doing well, there is no need for Jerome Powell to lower the Federal Funds rate. The Fed must always strike a balance between providing liquidity and hedging against purchasing power degradation.

SimplyTracie · 26-30, F

@quitwhendone But experts are saying a recession is around the corner. Would a lower interest rate help mitigate a recession?

quitwhendone · M

@SimplyTracie I am not sure. I am not an economist. Interestingly, Powell is not an economist either. He's the first non-economist Fed Chairman in over 30 years. He is a lawyer by training who has worked for big investment banks. Usually, interest rates aren't adjusted until positive proof of a significant change in GDP growth. And there are other signs of a slowing economy but not a notable change in GDP growth. There may not be a recession in the near future. It's possible that GDP growth will just slow to a crawl without contracting.

SimplyTracie · 26-30, F

@quitwhendone I’m gonna look up the word contracting as it relates to the GDP. 😊

quitwhendone · M

@SimplyTracie Economies either expand or contract. "Expands" means it's growing. "Contracts" means it shrinks (gets smaller.)

SimplyTracie · 26-30, F

@quitwhendone That was easy enough. 😊