The Fed Cut Rates. How Does The Economy Compare To Past Rate Cut Cycles? | 7/11/2019 | Staff
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WASHINGTON (Reuters) – The U.S. Federal Reserve this week launched its fifth interest rate-cutting campaign since 1995, citing a global economic slowdown and persistently weak inflation. The quarter percentage point rate came despite many signs of strength in the U.S. economy.

In a news conference on Wednesday explaining the policy move, Fed Chair Jerome Powell made clear the U.S. central bank thinks the nation’s labor market looks pretty solid. He said this might not be the start of an extended series of rate cuts.

Run - Insurance - Cuts - Risks - Recession

A limited run of so-called insurance cuts might be just enough to reduce the risks of recession, which have grown because of the Trump administration’s trade war with China and a slowdown in economies across Europe, Asia and Latin America.

How does recent data on the U.S. economy compare to what was happening ahead of the rate-cutting campaigns that started in 1995, 1998, 2000 and 2007?

US - Consumer - Prices - % - Months

U.S. consumer prices rose 1.4% in the 12 months through June, just below the rate it has averaged since the Great Recession ended in June 2009. The Fed wants inflation at 2%, and weak price gains have become a defining characteristic of what is already the longest U.S. economic expansion on record. Inflationary pressures were higher in 1995, 1998 and 2007.

Low inflation plays into the Fed’s calculus in two ways.

American - Manufacturing - Tenth - US - Economy

American manufacturing, which powers about a tenth of the U.S. economy, is the main sector already...
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