Key facts:
The Fed cut rates for the first time in more than four years.
Although it stimulates the economy, a 50-point cut may reflect economic weakness.
Republican presidential candidate Donald Trump has given his opinion on yesterday’s 0.5% interest rate cut in the United States.
“I guess it shows that the economy is in too bad a shape to cut back that much, assuming they are not just playing politics,” he said. The statement took place last night while the republican leader I was campaigning in a bar that pays homage to bitcoin (BTC) in Manhattan, New York.
The Republican, who was president of the United States from 2017 to 2021 and is seeking to return to office this year, shared his impression of the change in monetary policy after making a payment in bitcoin at the bar, in support of the crypto-asset community.
Trump called the size of the rate cuts big. “It was a big cut,” he exclaimed. That is why he thinks that represents signs of weakness in the economy.
The cut, which was the first in more than four years since the Covid-19 pandemic, brought rates down from 5.5% to 5.0%. This put an end to restrictive monetary policy, which was at its highest level in two decades, as seen below.
It is worth noting that, although a reduction in interest rates lowers the cost of borrowing and increases liquidity, it may reflect a weak economy. For this reason, while it seeks to boost economic activity, it fuels fears of recession generated by the slowdown in the labor market.
“The economy is either very bad or they are playing politics,” Trump insisted. “It’s one thing or the other,” he added, as the US presidential election is two months away. The Republican is contesting the presidency with Kamala Harris, the candidate of the Democrats, the party that currently leads the government.
Trump’s statements contradict those given yesterday by Jerome Powellpresident of the Federal Reserve (Fed), the United States Central Bank. As reported by CriptoNoticias, he was optimistic about the economy in his speech after the rate cut announced by the organization.
Powell says US economy is strong
“Our economy is strong overall and has made significant progress toward our goals over the past two years,” Powell said. This is despite, he clarified, the fact that annual inflation has not yet come down to its 2% target and the labor market has slowed.
Despite the slowdown in the labor market, the Fed chief said that it remains strong, with data similar to those before the pandemic, while he sees the economy as “solid.” “We want to keep it that way,” he warned as inflation moves toward its 2% target. It is currently at 2.5%, as shown in the graph.
About the Uncertainty over whether the cuts have hidden political motivationsPowell said his moves “are never about that.” “The things we do really affect economic conditions for most people, so our job is to support the economy,” he concluded.
Markets reacted positively to the rate cut, but are expected to remain highly volatile in response to data that provide more clarity on economic development.
