While the US economy continues to expand, it is growing at a slower pace.
The game of high stakes poker in the form of trade negotiations between the USA and China could reach unforeseen heights.
"Certainly, escalating trade tensions through higher tariffs and restricted access to markets is hurting sentiment, increasing costs, damaging supply chains and weakening corporate profitability", wrote James Knightley, chief worldwide economist at ING. "And coming into question is the broader fundamental strength of economies around the world". The tweets come on the heels of surprise rate cuts by Thailand, India and New Zealand on Wednesday. It is then expected to ease again late next year.
Delivered all at once, a full percentage point would be dramatic - the sort of step associated with a severe economic shock, as opposed to the quarter-point increments that the Fed tends to rely on to fine-tune its target interest rate. When the Federal Reserve announced the cuts last week, Trump voiced his displeasure via Twitter and took aim at the central bank's chairman, Jerome Powell, who has held the post since early 2018 after being nominated by the president. Fed officers cited considerations a few global financial slowdown and trade tensions, and furthermore acknowledged they may perhaps discontinue reducing its balance sheet. Together the four chairs served 40 years at the position of Fed chair and were appointed and reappointed by both Democratic and Republican presidents.
But a key central bank policymaker, St. Louis Federal Reserve Bank President James Bullard, told AFP on Tuesday that benchmark United States lending rates were "in the right neighborhood", suggesting he may be disinclined to cut rates as fast and as far as Trump wanted. "But research has shown that monetary policy based on the political (rather than economic) needs of the moment leads to worse economic performance in the long run, including higher inflation and slower growth", wrote the former Fed leaders. But the rest did not.
But the U.S. central bankers "have called it wrong at every step of the way".
"They don't need to cut at the moment".