The US Federal Reserve is getting ready to lower interest rates for the first time in a long period. However, analysts predict the easing cycle will be mild compared to previous cycles.
Mild Start
Economists at Fitch expect an initial 25-basis-point cut, followed by another 25-basis-point cut in December. The rate cuts are projected to total 125 basis points in 2025 and 75 basis points in 2026.
Reasons for Caution
The primary reason for the cautious approach to rate cuts is the still-present inflation. The Consumer Price Index (CPI) remains above the Fed's target of 2%, with core inflation, which excludes volatile food and energy prices, mainly driven by falling auto prices.
Global Implications
The rate cuts by the Fed will have global impacts. For example, the People's Bank of China surprised markets by lowering rates in July, which affected China's domestic economic indicators such as producer and export prices.
The US Federal Reserve is cautiously lowering interest rates to avoid a resurgence of inflation while supporting economic growth. Observations of the developing situation will continue.
Comments