US Federal Reserve lowers interest rate

US Federal Reserve lowers interest rates

The US Federal Reserve followed expectations and lowered the key interest rate corridor to 1.75% to 2.0% with its latest monetary policy decision. Once again, this decision was not taken unanimously. The interest rate for surplus reserves (IOER) was lowered by a total of 30 basis points. This adjustment in monetary policy is probably due to the recent tensions on the money market. On the whole, however, it has been apparent for some time that the IOER has developed upward momentum because market participants park their liquidity in other forms of investment (e.g. US Bills) and do not make it available to the money market.

At the press conference, Fed Chairman Powell once again sounded quite optimistic about economic developments. Overall, the Fed does not commit itself. Further interest rate policy will mainly depend on the development of economic data. The speed of interest rate cuts is therefore not yet fixed, but depends on the downward dynamics of the data.

 

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