The Fed meet is to be held on 31st July 2019. Most of the experts expecting for 25bps rate cut but some more analysts expecting a rate cut for 50bps. Now what will happen if Fed cuts the interest rate by 50bps? Here we see:
The Fed members are very much worried about the inflation rate which is much below the expected target of 2%. So no need of rate cut and if there is a higher rate cut then the inflation will grow higher which the Fed doesn’t want to happen.
The long term bond yields are not satisfactory for the investors as the short term bond yields gives better returns than long term yields. The investors are not in a mood to pay higher premium for long term yields. This also makes the investors that a rate cut will occur.
The employment rate had a growth and is much more than expected by the analysts. It is not a worry even if the Fed is announcing 50bps point cut.
The economy is strong for U.S when comparing to other countries. If the Fed has a bigger rate cut a threat for financial market bubble may be visible. Moreover the debt will increase and move for a beginning of recession phase.