Four reasons why the US Fed's 25 bps rate cut assumes significance

With the US-China trade standoff still to be resolved and with Brexit also in limbo, a cut in rates should help to assuage sentimen

Economy & Policy: The rate cut by the US Federal Reserve (US Fed) is significant for four reasons. The first is that it was widely expected and hence was a not a surprise. In a way, it is a victory for President Donald Trump (the $1 trillion tax cut has not quite worked?). The second is that it comes after 10 years, which is a fairly wide hiatus and could be the beginning of another rate cut cycle. The third is that the cut has been invoked at a time when there is no recession or any sign of it, and even though the economy has slowed down from 3.1 per cent in Q1 to 2.1 per cent in Q2, the unemployment rate is healthy (at a 50 year low) and inflation is close to the 2% target. Fourth, for the first time, it appears global concerns of slowdown have also played its role. Read More

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