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What Would a 300 Basis Point Rate Cut Mean?

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by Giorgi Kostiuk

9 hours ago


Since Donald Trump's presidency began, he has advocated for a significant reduction in interest rates by the Federal Reserve. This initiative raises questions about potential economic consequences.

What Would a 300bp Rate Cut Mean?

Trump's push for a massive 300bp rate reduction is considered bold. The most significant previous cut occurred in March 2020 at just 100bp. By lowering rates, Trump aims to cut the annual $1.2 trillion in national debt servicing costs.

Is a 300bp Rate Cut Realistic?

Achieving a 300bp cut seems very improbable given historical trends. Even during the financial turmoil of 2008 or the COVID-19 crisis, such deep cuts were unseen. Most experts view such a move as an unlikely scenario.

Impact on Economy and Housing Market

The potential rate cut could influence economic metrics. Economic growth could exceed 3.8%, and inflation rates may soar past 5%. Additionally, falling mortgage rates could inflate housing prices by over 25%, which could further drive inflation. One expert noted: “The dollar has started 2025 with its worst first and second quarter since 1973, with a -10.8% decline.”

However, while proposing such ambitious measures, Trump and his team must consider the real-world implications of these decisions to balance short-term political gains with long-term economic stability.

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