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The Fed may soon cut the excess reserve rate to lower the federal funds rate

November 08, 2018 21:43
source: Eastern Fortune Network

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According to Huitong.com, the US Federal Reserve seems to be preparing to fine-tune again before the end of the year to slow down an important short-term.interest rateUplink speed

The Fed seems to be preparing to cut excess reserves paid to banks by the end of the year.interest rate(IOER), or to make this interest rate further away from the high end of its benchmark federal funds rate target range, but this will be essentially technical in nature.

Currently, the Fed’s federal funds rate target range is between 2% and 2.25%, while its excess reserve rate is set at 2.2%.

In June, the Fed slightly cut the excess reserve rate because the federal funds rate continued to approach the high end of the target range. The federal funds rate is determined by market forces and floats within its target range. The goal of adjusting the excess reserve rate is to lower the federal funds rate and return it to the midpoint of the target range.

At 03:00 Beijing time on November 9, the Federal Reserve will announce the interest rate resolution and issue a monetary policy statement. Although the Fed’s meeting will face changes in the US political situation, there has been no change in the US economic data recently, so it is not enough to change the December rate hike and plans to continue raising interest rates next year.

Earlier, the US stock market fluctuated again and the credit market tightened. The market generally expects the US economy to slow down next year.AnalystIt is also expected that there will be no major changes in the Fed’s monetary policy.

However, the Fed may announce that the real estate market may slow down and corporate investment may decline as a reason to judge that US economic growth is slowing. At the same time, since the Fed’s September meeting, employment growth in the United States has been strong, as has household spending.

JPMorgan analyst Michael Feroli said: "We expect that this statement will not change compared to the Fed's policy statement in September." The Fed said in a policy statement in September that the US Strong economic growth.

Economic data released at the end of October showed that the US economy grew at an annual rate of 3.5% in the third quarter of this year, much higher than the expected value of the Fed and many economists around 2%.

                (Editor: DF134)

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