The U.S. Secretary of the Treasury believes that the Fed's current interest rate policy is too high and needs to be reduced by 150 to 175 basis points.
He expects the Fed to begin a series of rate cuts, possibly starting with 50 basis points in September, based on positive data and the recovery of corporate profits to pre-pandemic levels.
MAIN CONTENT
The Fed's interest rate policy is currently assessed as overly tight.
The Fed is expected to reduce interest rates by a total of about 150-175 basis points.
Corporate profits are returning to pre-pandemic levels, facilitating the reduction of interest rates.
What does the U.S. Secretary of the Treasury say about the Fed's interest rate policy?
The Treasury Secretary's assessment indicates that the current policy is too tight and needs to be adjusted downwards to stimulate the economy.
He emphasizes that implementing a series of interest rate cuts is necessary, with a total reduction of 150 to 175 basis points to support economic growth and stabilize the market.
Additionally, this perspective is based on actual observations of corporate profits, helping to identify the right time to change monetary policy.
When can the Fed start reducing interest rates and by how much?
According to Secretary Benson's assessment, the Fed may start reducing interest rates as early as the upcoming September meeting, with a reduction of 50 basis points being quite plausible.
The series of multiple rate cuts is forecasted to occur based on current economic data, aiming to ensure economic stability while supporting business recovery.
The expected reduction in the basis points is anticipated to help the financial markets maintain better liquidity and reduce borrowing costs for businesses and individuals.
Cutting interest rates early will facilitate sustainable economic recovery, as corporate profits have returned to average levels seen before the pandemic.
U.S. Secretary of the Treasury, August 2023
How do corporate profits influence the Fed's interest rate decisions?
The recovery in corporate profits provides policymakers with a solid basis for adjusting interest rates appropriately.
When corporate profits return to normal pre-pandemic levels, this reflects an improving economic health, allowing the Fed to ease monetary policy.
This is also seen as a positive signal to reduce concerns about risks to loans and investments in the financial market.
What are the expected impacts of lowering interest rates on the U.S. economy?
Lowering interest rates will boost consumer spending and investment as capital costs are eased, thereby supporting economic growth.
This also helps improve employment conditions, increases liquidity for businesses, and stabilizes the financial market against external fluctuations.
However, this decision needs to be carefully considered to avoid the risk of inflation returning or causing instability in the long run.
Frequently Asked Questions
What issues does the Fed's current interest rate policy have?
The Fed is applying an excessively tight interest rate policy, impacting economic and business growth.
How many basis points is the Fed expected to reduce interest rates?
The series of reductions could reach from 150 to 175 basis points, starting with a 50 basis point cut in September.
What is the current state of corporate profits?
Corporate profits have returned to pre-pandemic levels, facilitating the easing of monetary policy.
What impact could reducing interest rates have?
Helps to increase spending, investment, and improve employment conditions, while increasing liquidity in the market.
When might the Fed start cutting interest rates?
The expected timing is the September meeting, with the first reduction of 50 basis points.
Source: https://tintucbitcoin.com/fed-co-the-giam-lai-suat-thang-9/
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