US interest rates cut for the first time in 11 years .. Q & A

Mohammed al-Menshawi, Washington

The global economic scene has been mixed with the Federal Reserve's decision to cut interest rates by a quarter percentage point, for the first time since October 2008, to a range of 2% to 2.25%.

Less than a day later, US President Donald Trump announced the introduction of customs tariffs on more than $ 300 billion of Chinese imports.
Al Jazeera Net is trying to explain these developments in the form of Q & A.

What does US interest rate cuts mean after 11 years?
As was widely expected, the Federal Reserve's decision to cut interest rates by 25 basis points (a quarter of a percent) was the first cut in more than a decade in interest rates as it has not suffered any cut since 2008.

Why lower interest rates?
The Federal Reserve confirms that its decision to cut interest rates is not at all related to any political rhetoric or positions of President Donald Trump.

Trump has been attacking the council for not taking a step to cut rates early.

Many experts blame the move on uncertainties about global growth and continued low rates that prompted Federal Reserve Chairman Jerome Powell to cut interest rates.

Despite the overall improvement in the US economy, especially in terms of unemployment and earnings from equity and bond markets, the US economy is slowing growth.

The US economy grew by only 2.1% in the last quarter, below the 3.1% achieved in 2018.
The interest rate cut is a pre-emptive move that reflects a major state of concern about global economic growth rates and continued low inflation.

How did Trump respond to the decision to cut?
Trump said the Fed chairman "let us down" by cutting interest rates by only a quarter percentage point, and noted that the market was waiting for a further decline.
"The thing the market wanted to hear from the board is that this is the beginning of a long and aggressive cycle of interest rate cuts that will be in place for China, the EU and other countries around the world," Trump said in a tweet just hours after the board issued its statement.

What impacts on the US financial and labor sector?
The cut in interest rates has frustrated investors and the US financial markets and some are likely to see that the cut came "in the middle of the monetary policy cycle", not the beginning of a new cycle.
"There is probably at least one more cut," Jerome Powell told a news conference after the Federal Reserve meeting.

The Standard & Poor's 500 Index and the Dow Jones index posted the biggest one-day drop in their trading in the past two months after Wednesday's cut, Reuters reported.

What about the impact of the cut on the American consumer?
The reduction decision means a reduction in the interest rates imposed on car loans or credit cards.

As for mortgage interest rates linked to government bond prices, they are not expected to fall.

US consumer spending accounts for two-thirds of the country's economy, and spending is now strong and is not expected to increase.

What can improve is the US business investment rate and increased spending, and more Americans will see the returns of the economic improvement their country has been experiencing in the last 10 years.

What impacts on the global economy?
The global economy is witnessing a slowdown similar to that of its US counterpart, and the US Reserve Bank is closely monitoring the steps and positions of central banks around the world.

According to Bloomberg, many financial experts in emerging market countries believe that the Fed's decision is somewhat negative for developing countries' assets, assuring traders that interest rates in the US will not see further large declines, which could reduce the transfer of investments from US assets To emerging market assets.

What is the relationship between reducing interest rates in the trade war between Washington and Beijing?
Most economists do not believe there is a direct link between US interest rate cuts and the US-Beijing trade war.