Donald Trump has time and again mentioned his dissatisfaction with the rates of interests of the Federal Reserve. He has also stated it now too many times that he thinks it is unfair for the interest rates to be so much high. He believes that the interest rates should be cut down low. The current situation of the market decline and Trump’s expectations have led to the creation of a confusing situation for the Federal Reserve.
The Federal does not know whether to act upon the market demand or to act upon Trump‘s expectation. The tumble in the yields of the bonds is an addition to the pressure on the Federal.
Recently, a cut in interest rates was enacted after which the 10-year yield bonds faced a remarkable decline. Jerome Powell, the Chairman of Federal Reserve, termed this interest rates cut as ‘mid-cycle adjustment’.
Government bond yields have faced a significant drop which wasn’t witnessed in years. These losses could lead the Federal to cut down on more interest rates which will in fact worsen the situation.
After the Trump and Xi tension, markets have been facing a steep drop in their rates. Trump threatened to introduce higher and additional tariffs on the goods exported by China. As a countermeasure, China halted the exports which led to losses of both sides. Yuan witnessed a significant decline in its value as low as below 7 points which is the lowest after 2008.
This trade war has added to the low yield. Clients are looking at the situation as heading towards a global recession.
Donald Trump has asked the Federal to cut down the rates rapidly by a significant number of points. It is likely that in the very upcoming days, we will witness another steep cut down in the interest rates.
