The US central bank should not start cutting interest rates too quickly. Fed minutes show that a large majority within the central bank is in favor of a slow rise in interest rates, but economist Edin Mujagic believes the majority would rather stop raising rates. ‘It’s not possible yet because inflation is still too high. Stopping now will jeopardize the Fed’s credibility.”
Inflation in America is now well above seven percent and the Fed has indicated interest rate cuts could begin once inflation “is on the road to 2 percent.” Not when inflation is at that rate, but when it’s on the way,” Mujagic says.
Inflation is not defeated yet
According to Mujagic, the Fed, like other central banks, is thinking about rate cuts too soon. “Those banks think they beat inflation. But if they decide to cut short-term interest rates, then I’m sure we can conclude next year that their decision was made too quickly.’
And so central banks shouldn’t rejoice too soon, but should remain vigilant. Because they need another round. Like the skater Hilbert van der Duin in 1981, he too had to go one more round as he thought he had already won the 5000m.’
COVID in China
According to Mujagic, there is another reason central banks need to be alert. The number of corona cases in China is soaring, so the capital Beijing “may be in lockdown”. And this is bad for the global economy. “Economic growth in the West is low, it is important for the economy that China comes out of the lockdowns.”
Source: BNR
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
