There is a strong possibility that the US Federal Reserve may decide to cut interest rates this month or next month.
What Happened With The US Fed?
Jerome Powell, who is the leader of the US Federal Reserve, was talking to the House Financial Services Committee on Wednesday, US time.
He spoke of both the positives and negatives that are going on with the US economy. He noted that the economy is mixed and that investment has notably slowed due to uncertainty arising from the US trade war with China continues.
Another problem could be that inflation may be weaker for longer than he previously thought, whilst the rest of the world’s growth is also slowing – which hurts the US.
US Fed Chair Mr Powell said: “There’s something going on with growth around the world, with manufacturing and trade, that is weighing on the domestic economy. The bottom line for me is the uncertainties around global growth and trade continue to weigh on the outlook.”
However, he also pointed to the fact that the US economy has grown for 11 years in a row and added over 220,000 jobs in the last month.
Should The Fed Cut Rates?
It’s very hard to know what the Fed should do, let alone what it will do. It wasn’t long ago that the Federal Reserve was saying it was going to keep increasing rates, so a decrease is a very quick turn around.
If the US economy is going to go into recession then it may be justified, but economies need to be able to go through downturns every so often.
Unsurprisingly, shares heavily linked to the US have reacted positively to the news with the Altium Limited (ASX: ALU) share price up 1.8% and the WiseTech Global Ltd (ASX: WTC) share price went up 2.8%.
Either way, normal economics seems to be going out of the window these days. That’s why I want to stick to investing in reliable and quality businesses for the long term, such as the ones in the free report below.
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Disclosure: Jaz owns shares of Altium at the time of writing, but this could change at any time.
