July 29, 2019 — FOMC Action Expected this Week

JULY 29, 2019 – FOMC ACTION EXPECTED THIS WEEK

It looks like, with nearly 100 percent certainty, the Fed will be lowering interest rates by 25 basis points this week as no news, worthy enough to cause a delay, was released.

Those clamoring for a rate cut have a list of reasons why the Fed needs to act now to avoid a recession. The arguments include: slowing job growth data, falling PMIs worldwide, inflation failing to heat up even with low unemployment and trade wars, weakening GDP and corporate profits, and an inverted yield curve as a harbinger of recession.

However, some economists are wary of the possible ramifications of the Fed making, what they see as, an unnecessary cut.  The US economy, though slowing, is not in danger; and by cutting rates now, the Fed is not giving itself leeway to jump start the economy by lowering rates if the situation becomes critical. Germany is in a zero interest rate state, yet their economy continues to weaken.  Low interest rates may create asset bubbles. They think, instead of playing with rates, efforts should be directed toward resolving the trade wars which would ease fears and build confidence in the economy.

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