How big will it be to cut interest rates?
With the expectation of a rate cut, investors will be prepared for the possible growth of the market.
So what conditions must be met before the United States will officially start to cut interest rates?
1. Economic growth slows down: Usually if economic growth shows signs of slowing down, such as an accelerated decline in GDP (gross domestic product), a slowdown in the growth rate of CPI (consumer price index) and corporate investment, policymakers will feel the need to stimulate economic growth by cutting interest rates.
2. Rising unemployment rate and falling non-agricultural data: The unemployment rate reflects the state of the job market, while non-agricultural data is an important indicator of the health of the labor market. If the unemployment rate rises and the non-agricultural data falls, it means that the economy is weak and the labor market conditions are deteriorating. The performance of the job market may be improved by cutting interest rates.
3. Weakened inflation pressure: The inflation rate is an important indicator of economic overheating or weakness, and curbing inflation is the main reason for the continuous interest rate hikes in the United States after the epidemic. The Federal Reserve usually sets the target inflation rate at around 2%. If the inflation rate continues to decline, close to or below zero, the Federal Reserve will tend to cut interest rates to stimulate the economy and push up prices to prevent deflation.
4. Global economic environment: The global economic growth slowdown and international events such as the Sino-US trade war have had a negative impact on the US economy. These international factors have increased economic uncertainty and forced the Federal Reserve to take interest rate cuts to protect the domestic economy.
In summary, based on several key data of the FOMC, the decline in GDP, the decline in CPI, the decline in inflation rate, the rise in unemployment rate, and the rise in non-farm data will increase the possibility of interest rate cuts.
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