• Mike

Interest Rates

I noticed in my WSJ news feed this morning that the Federal Reserve continues to contemplate rate reductions. I find this very interesting at what could be the latter part of an extended economic expansion with record low unemployment. Although there is little or no inflation, more capital just does not feel like the right prescription at the moment for the economy.

The only explanation that comes to mind for me is the larger geo-political circumstances. In a prolonged trade war with China perhaps lower rates is the medicine the US economy needs to absorb the negative impacts and sustain to the desired outcome. In the absence of these economic circumstances perhaps lower rates would not be appropriate, or even considered. Historically, China is very deliberate in how they manage their economy so maybe this is how the US economy sustains itself to a reasonable and fair conclusion of this trade dispute.

The Chinese economy continues to expand but on a per capita basis lags most of the developed world, amongst many other challenges. We can expect they will continue to push for the development of their own people and economy, as will the US. Hopefully we can get to a fair and equitable resolution that serves the interests of both sides and the larger global economy.

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