US Interest Rate Cuts Stimulate Economy
Published / Last Updated on 22/04/2008
US Interest Rate Cuts Stimulate Economy
The Federal Reserve cut US interest rates recently by 75 basis points (0.75%) to 2.25 per cent in an attempt to balance the need for growth stimulus against inflationary fears. The Federal Open Market Committee cited slower consumer spending and softening labour markets as two factors prompting the cut.
The committee also said “Financial markets remain under considerable stress and the tightening of credit conditions and the deepening of the housing contraction are likely to weigh on economic growth over the next few quarters”
Our view
These cuts along with another 0.25% cut in the UK will restore confidence in financial markets. However, there are many other influences such as escalating oil prices and the credit crunch.
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