What if the Fed cut rates to just 1% like Trump wants? An analyst says it’s ‘ludicrous’ and may scare businesses

The federal funds are currently sitting by 4.25 % -4.50 %, which means that reducing this size requires a radical step that exceeds the typical increases by the Federal Reserve at the same time simultaneously (although the last half a point in September).

He is very extreme, and Wall Street’s doubts are already, because it will lead to tremendous disturbances in the financial markets and economics.

“I don’t think this should be taken seriously, because it is very ridiculous, and in some respects the low prices are very low, prematurely, very early, he will do what you don’t want to happen exactly,” said Jeffrey Roche, chief economist at LPL Financial luck.

This is because the tank revenues in the long run will rise as the bond investors are proud of higher inflation that the average of 1 % will be concluded, raising the costs of borrowing for consumers and companies.

In addition, a low rate is usually associated with an economic emergency such as the Covid-19 pandemic or the great financial crisis.

So 1 % may actually shock companies to wonder whether the other disaster is in the corner, which leads them to decline and wait instead of expanding.

He said: “As a large employer, who is looking at prices by 1 % or 2 %, I definitely say,” What do you know that I do not do? “Therefore, I will not want to increase Capex and increase operations to the company. I will be more interested in what indicates this. ”

A White House spokesman indicated that Trump’s previous comments indicated that the Federal Reserve can always raise the rates and must raise the rates again if the inflation extends after cutting it.

For his part, Roth believes that there is room for rates to decrease eventually to 3.5 % by the end of 2026, if inflation remains under control, Powell said he did not raise rates soon when inflation increased after the epidemic.

Likewise, Jay Philseld, CEO of Infrastructure, accused Jay Philsel Powell of the total efficiency of it was too late to raise rates, but he also set out in the idea of reducing federal reserves to 1 %.

Treasury revenues will initially decrease in the wake of the direct reduction to 1 %. But as soon as the inflation indicators begin to refer to the top, the FBI will return to 4 % to reduce the width of the money, sending the return for 10 years to about 5 %.

After small boundaries or withdrawal, the return will end with about 3.75 %. “Therefore, it is a terrible economic policy to do so,” he said. luck.

Philseld added that the FBI’s money rate is about 2.75 % -3 % will not spoil inflation or send the economy to a shrinkage, but maintaining prices as they will now lead to recession. However, the average of 1 % requires a tremendous expansion of the width of the money.

He warned, “It is a completely ridiculous idea and will cause an ampl for two numbers.”