Will the US Fed go for an emergency rate cut to save the economy from recession?

Will the Federal Reserve cut bank interest rates before September 18? After the bloodbath at stock markets worldwide, triggered by an apprehension of recession in the US economy, investors speculate that the Fed Reserve may take an emergency measure to stop the situation from further deterioration, reports Bloomberg. Though it can yet not be concluded going by the economic data that the US economy is entering a recession, the Federal Reserve may begin easing monetary policy aggressively to head off a recession.

Why is the Fed Reserve worried?

According to the 'New York Times', Fed officials are concerned about the sudden unemployment jump. The latest jobs report is evidence that the job market is slowing. It has come at a time when consumer spending is stagnant. Another grave concern is the 10-year yield that reached 3.7% on Monday. The German yields came down to the lowest in seven months on the speculation that the European Central Bank might follow the Fed and announce deeper interest-rate cuts.

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Will the ECB slash interest rates?

The ECB may announce a 50 basis point cut in September. It still has a total of 90 basis points of easing for the rest of the year. Besides, the two-year Treasury yield fell by half a percentage point to less than 3.9% last week. It is still above the Fed’s benchmark rate of 5.3%.

When will the Fed Reserve meet?

If the Fed Reserve convenes an unscheduled meeting to consider the rate cut, it would not be so for the first time. It happened as recently as March 15, 2020, when the Fed slashed borrowing costs to near zero as the coronavirus pandemic sent panic across global markets.

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The economists further believe that the Central Bank has held interest rates at 5.3 percent for a full year, it is a relatively high setting making it expensive to borrow to buy a home or expand a business. It is feared that the Fed has choked off demand too much and for too long, and it has triggered a slowdown in the labor market. This may snowball into a wider economic crisis.

FAQs

When did the Fed Reserve hold an unscheduled meeting last time?
The Fed Reserve held its unscheduled meeting on March 15, 2020, when it slashed borrowing costs to near zero as the coronavirus pandemic sent panic across global markets.

What forced the Fed Reserve to consider holding an unscheduled meeting?
The Fed Reserve considered holding an unscheduled meeting after the bloodbath at stock markets worldwide, triggered by an apprehension of recession in the US economy. Now, investors speculate that the central bank may take an emergency measure to stop the situation from further deterioration.