June 14, 2019, | SQUARED DIRECT – At the previous FOMC June meeting on March 21st, the federal funds rate stayed at 2.5 percent with positive estimations and signals from the FED that the same rate would be kept until 2021. However, Federal Reserve officials are now concerned about the weakening state of the economy and how US tariff wars and threats with many of its trading partners have upset the international markets.
Will the Fed cut interest rates?
The FED is now seriously considering cutting interest rates after all, despite their previous estimations of a tight and steady rate.
The main issue behind the push for monetary policy loosening is uncertainty over tariffs caused by how unpredictable the US President is on this and other relevant matters. This uncertainty is greatly upsetting the markets which are now betting that there could be more than one rate cut coming up, with the first one if not in June then possibly in July, another in September and a probable third one around December.
The interest rate is important because it is perceived as a benchmark and indicator of the economy’s health. By adjusting the rate, the FED directly controls short term interest rates which include bank prime rates, most adjustable-rate, interest-only loans, and credit card rates. During the 2008 recession, the Fed had to lower its benchmark rate to 0.25% where it stayed until December 2015.
Before raising the fed funds rate a quarter point to 2.5 percent on December 19, 2018 the Fed had raised rates as follows:
- 5 percent on Dec. 15, 2015.
- 75 percent on Dec. 14, 2016.
- percent on March 5, 2017.
- 25 percent on June 14, 2017.
- 5 percent on Dec. 13, 2017.
- 75 percent on March 21, 2018.
- percent on June 13, 2018.
- 25 percent on September 26, 2018.
Some investors and analysts expect gold prices to rise in the event of falling US dollar rates and suggest that there might be a need for hedging and investment strategy adjustment.
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