U.S. stock markets have increased on the back of heavy investor interest rate cut speculation.
Investors are betting on an interest rate cut. This will most probably happen, but the question now is, by how much?
The Federal Reserve Bank
The Fed disappointed the stock markets in December 2018, and I don’t expect that will happen again. Recent economic news has been better than expected but talk of global economic slowdown persists. Not least because of the U.S. China trade war escalation.
The U.S. – China trade war, interest rate cut expectations and better than expected earnings reports are the main areas affecting U.S. markets right now.
Inflation control tool
Low inflation persists in the U.S. economy and cutting interest rates is one of the tools central banks use to fight inflation. This is one of the main reasons a cut is likely. But an early strike to cut rates to keep the U.S. economy on track, because of global economic woes, sits high on the Fed’s agenda too.
Trump wants a bigger cut
If Trump had his own way he would encourage a 1% cut and call for more quantitative easy too. But is this really necessary? The U.S. economy isn’t in such a bad shape, is it?
In recent days cautionary dialogue has crept in to the discussion. Trump will not be pleased. The Federal Reserve meet 30th & 31st July.
This will be a closely watched meeting.