Interest rates down, aluminium costs up: Breaking down the Fed’s move
Federal interest rate cut often creates a paradox. On one hand, it is intended to shore up economy by making borrowing cheaper and encouraging businesses to take loans to invest in hiring and expanding production. On the other hand, this exercise potentially leads to inflation, dampens stock market growth, reduces investment appetite, and affects consumer behaviour. The recent Fed rate cut in September by a quarter-point, bringing down the rates to 4 to 4.25 per cent, is also triggering the same conundrum.
While the latest rate cut is aimed at boosting economy and employment, it fuels the risk of inflation from the current 2.9 per cent as of the end of August. But the fact is the government is now prioritising jobs over price stability.
"The labour market is really cooling off," said Fed Chair Jerome Powell at a news conference on Wednesday after the announcement of rate cut.
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