On Tuesday, American Central bank cut its basic interest rates in 0,5 percentage point to avoid recession, yet it was not successful
Therefore, deeper rate cuts may follow.
It may happen very soon as the Fed made the emergency rate cut on Tuesday already, to help the American economy avoid possible recession caused by coronavirus epidemic. Such a step was last undertaked in 2008 in reaction to the collapse of Lehman Brothers Holdings. In upcoming months, Fed cut interest rates to 0%.
The US interest rates may soon reach zero. Especially now, when the Fed does not have much space for more cuts unlike rate cuts imposed 12 years ago. Even before Tuesday decision, basic Fed interest rates were between 1,5% and 1,75%. It was 4 times more before the financial crisis.
According to JP Morgan analysts, there’s 50% chance that Fed interest rates will drop to zero this year. If the step turns out to be insufficient, the Fed will not hesitate to apply quantitative easing. For now, it’s too early to predict.
