Market Volatility: Fed is ready to reduce rates!

Susan Collins, chairwoman of Fed of Boston, is facing the turbulence of the financial markets amplified by commercial policies by Donald Trump, announced that the federal reserve system is being prepared for intervention. Among the possibilities expected to stabilize the markets, the reduction of interest rates could become inevitable if the situation deteriorates.

The Fed is ready to hit to stabilize the markets!

While Donald Trump announces a 90 -day break on customs tariffs, the Federal Reserve System of the United States is about to intervene to stabilize the financial markets if necessary. Susan Collins, President of Boston Fed, said the central bank has several tools that respond to any disturbance, especially in terms of liquidity and operating markets. These comments come when the US financial markets are shaken by President Trump’s business policies and, according to JPMorgan, raise recession concerns up to 60 %.

As a result, the disorders influenced Wall Street and spread to the government bond market, the central sector of the global financial system. Collins said that although the current situation does not cause major liquidity problems, volatility has increased, especially on the cash register market. The potential tools for stabilizing markets are expected to reduce interest rates, but it is not a priority to solve immediate problems.

Towards the drop in rate?

Some experts believe that a decline in rates could become inevitable if market volatility intensified. The purpose of this measure would be to facilitate access to the loan and support the economic recovery. Susan Collins, however, explained that the Fed would not rush to reduce rates because it first wants to monitor the development of economic conditions. Interest rates should therefore remain stable in the short term, the Fed favored more targeted interventions to treat specific market dysfunctions.

In 2020, during the Coronavir crisis, Fed has taken exceptional measures, such as renewing debt purchase programs and reducing interest rates at almost zero levels. This approach can be considered again if market conditions required.

The Fed therefore remains alert in the face of the market development, ready to intervene to maintain its stability. However, it prefers the use of targeted tools and avoiding interest rates with the exception of absolute necessity. The next few weeks will be essential for assessing the impact of trade policies that have already had $ 3,250 billion markets in 24 hours.

Eddy S.

The world is evolving and adaptation is the best weapon that survives in this undulating universe. I am interested in everything about blockchain and its derivatives. To share my experience and promote an area that fascinates me, nothing better than writing informative and relaxed articles simultaneously.

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The words and opinions expressed in this article are involved only by their author and should not be considered investment counseling. Do your own research before any investment decision.