Will the FRB take a step towards "preventive interest rate cuts"? Looking back at the past 35 years of FRB interest rate cut cycles.
From recent statements by Federal Reserve Chairman Powell,It seems that a new interest rate cut cycle is about to begin.That.The impact of interest rate cuts on the economy and the market.In order to explore, the United States looked back on the five interest rate cut cycles it experienced in the past 35 years. Each interest rate cut.Specific economic background and reasons.It can be seen that there were contrasting factors.
In contrast, the current rate cut by the FRB is closer to a precautionary rate cut, similar to the purpose of the starting stage in 1990-1992 and 1995-1998.① 1990-1992: A rate cut cycle to alleviate the savings and loan crisis and economic downturn pressures.。
The Federal Reserve Board (FRB) continuously lowered interest rates from July 1990 to September 1992. The federal funds rate was lowered from 8% to 3%.
In 1990, the FRB...
In 1990, the FRB...The economy is starting to slow down and the financial market is becoming unstable.The committee gradually transitioned to an accommodative policy, paying attention to the slowdown of the economy and the tightening of bank lending due to the rise in food and fuel prices. In July, the inflation rate increased, but the economy slowed down and the committee decided to implement a rate cut.
The price of crude oil in June 1990 was $41.33, but due to the outbreak of the Gulf War, it soared to $93.64 in September, more than double the price three months ago.This put a significant pressure on the American economy. The GDP growth rate in the United States dropped from 1.89% in 1990 to -0.11% in 1991. At the same time, the unemployment rate increased from 5.6% in 1990 to 7.5% in 1992.By October, the economy had deteriorated significantly and the committee decided on further easing. At the same time, the government reached a budget agreement for fiscal deficit reduction, and the FRB also implemented easing measures. By the end of 1990, the economic situation worsened further, putting a strain on the financial system and easing inflationary pressures.
In contrast, the current rate cut by the FRB is closer to a precautionary rate cut, similar to the purpose of the starting stage in 1990-1992 and 1995-1998.① 1990-1992: A rate cut cycle to alleviate the savings and loan crisis and economic downturn pressures.。
The Federal Reserve Board (FRB) continuously lowered interest rates from July 1990 to September 1992. The federal funds rate was lowered from 8% to 3%.
In 1990, the FRB...
In 1990, the FRB...The economy is starting to slow down and the financial market is becoming unstable.The committee gradually transitioned to an accommodative policy, paying attention to the slowdown of the economy and the tightening of bank lending due to the rise in food and fuel prices. In July, the inflation rate increased, but the economy slowed down and the committee decided to implement a rate cut.
The price of crude oil in June 1990 was $41.33, but due to the outbreak of the Gulf War, it soared to $93.64 in September, more than double the price three months ago.This put a significant pressure on the American economy. The GDP growth rate in the United States dropped from 1.89% in 1990 to -0.11% in 1991. At the same time, the unemployment rate increased from 5.6% in 1990 to 7.5% in 1992.By October, the economy had deteriorated significantly and the committee decided on further easing. At the same time, the government reached a budget agreement for fiscal deficit reduction, and the FRB also implemented easing measures. By the end of 1990, the economic situation worsened further, putting a strain on the financial system and easing inflationary pressures.
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The economic stimulus effect after the Federal Reserve's interest rate cut was significant. The U.S. Consumer Price Index (CPI) rose from 121.1 points in 1989 (pre-war) to 141.9 points in 1993 (post-war), with a 4.48% increase compared to 1988 and a 2.75% increase compared to 1992. The U.S. GDP growth rate recovered from -0.11% in 1991 to 3.52% in 1993.
On the other hand, the interest rate cut had a significant stimulating effect on short-term market performance.
Cycle of interest rate cuts for economic recession prevention and financial risk management from 1995 to 1998
From July 1995 to January 1996, the FRB implemented a series of interest rate cuts. This was a small-scale reduction, and the Federal Funds Rate fell from 5.75% to 5.25%.
On the other hand, the interest rate cut had a significant stimulating effect on short-term market performance.
Cycle of interest rate cuts for economic recession prevention and financial risk management from 1995 to 1998
From July 1995 to January 1996, the FRB implemented a series of interest rate cuts. This was a small-scale reduction, and the Federal Funds Rate fell from 5.75% to 5.25%.
To control inflation, the FRBimplemented a tightening cycle from 1994 to 1995 and achieved a 'soft landing' for the economy.However, the market began to worry about an economic downturn. To prevent further economic slowdown, the FRB chose to lower interest rates in 1995 and 1996, aiming to stimulate economic activity through a loose monetary policy and avoid potential recession.
After these interest rate cuts, the U.S. economy continued to recover, and the GDP growth rate rose from 2.68% in 1995 to 3.77% in 1996, further increasing to 4.45% in 1997.
In July 1997,The Asian financial crisis erupted following a sharp devaluation of the Thai Baht, and developed into a currency and financial crisis across the entire Asian region. The crisis rapidly spread to Southeast Asian countries, causing currency devaluations, stock market crashes, and significant pressure on the banking system and businesses. This led to panic in the global market and increased volatility in the financial markets.From September to November 1998, the Federal Reserve (FRB) implemented consecutive interest rate cuts, reducing the federal funds rate from 5.50% to 4.75%. There were two important reasons behind the FRB's interest rate cuts at that time:
Federal Reserve (FRB)This was due to the prevention of an economic slowdown.、フェデラルファンド金利は5.50％から4.75％に低下した。当時のFRBの利下げには2つの重要な理由があった。
(1) Prevention of an economic slowdown：米国経済は好調であったにもかかわらず、FRBは世界経済の不安定さが米国経済の足を引っ張ることを懸念していた。 FRBは金利を引き下げることで、起こりうる景気減速を防ぎ、経済の継続的拡大を確保することを望んだ。
(2) 金融市場の安定化：1998 年、国際金融市場の不確実性が米国の株式・債券市場の変動につながり、 特に長期資本管理（LTCM）危機は市場の不安を強めた。
FRBは金融市場を安定させ、金融危機の拡大を防ぐため、利下げによって流動性を高めた。利下げは主に4つの効果をもたらした。
1) 借入コストの引き下げにより、金融機関が資金を調達しやすくなり、特にLTCM事件後、リスクへの懸念から市場が保守的になっていた金融市場の緊張が緩和された。
2) 市場に自信を与え、FRBは利下げによって金融システムを安定させるために行動を起こす能力と意欲を示し、これは投資家と金融機関の信頼を回復する上で重要であった。
3) ロシアで広がる金融危機を背景に、FRBの利下げは世界経済を支え、危機の広がりを抑えた。
4) FRBは経済に追加的な成長モメンタムを注入It helped to avoid the risk of an economic downturn.
The real GDP growth rate in the United States in 1998 was 4.5%, and it remained strong in the midst of an uncertain global environment.After the rate cut, the consumer price index in the United States rose from 161.6 points in 1998 to 168.3 points in 1999. The year-on-year growth rate was 1.55% compared to 1997, and 2.68% compared to 1998.
After these interest rate cuts, the U.S. economy continued to recover, and the GDP growth rate rose from 2.68% in 1995 to 3.77% in 1996, further increasing to 4.45% in 1997.
In July 1997,The Asian financial crisis erupted following a sharp devaluation of the Thai Baht, and developed into a currency and financial crisis across the entire Asian region. The crisis rapidly spread to Southeast Asian countries, causing currency devaluations, stock market crashes, and significant pressure on the banking system and businesses. This led to panic in the global market and increased volatility in the financial markets.From September to November 1998, the Federal Reserve (FRB) implemented consecutive interest rate cuts, reducing the federal funds rate from 5.50% to 4.75%. There were two important reasons behind the FRB's interest rate cuts at that time:
Federal Reserve (FRB)This was due to the prevention of an economic slowdown.、フェデラルファンド金利は5.50％から4.75％に低下した。当時のFRBの利下げには2つの重要な理由があった。
(1) Prevention of an economic slowdown：米国経済は好調であったにもかかわらず、FRBは世界経済の不安定さが米国経済の足を引っ張ることを懸念していた。 FRBは金利を引き下げることで、起こりうる景気減速を防ぎ、経済の継続的拡大を確保することを望んだ。
(2) 金融市場の安定化：1998 年、国際金融市場の不確実性が米国の株式・債券市場の変動につながり、 特に長期資本管理（LTCM）危機は市場の不安を強めた。
FRBは金融市場を安定させ、金融危機の拡大を防ぐため、利下げによって流動性を高めた。利下げは主に4つの効果をもたらした。
1) 借入コストの引き下げにより、金融機関が資金を調達しやすくなり、特にLTCM事件後、リスクへの懸念から市場が保守的になっていた金融市場の緊張が緩和された。
2) 市場に自信を与え、FRBは利下げによって金融システムを安定させるために行動を起こす能力と意欲を示し、これは投資家と金融機関の信頼を回復する上で重要であった。
3) ロシアで広がる金融危機を背景に、FRBの利下げは世界経済を支え、危機の広がりを抑えた。
4) FRBは経済に追加的な成長モメンタムを注入It helped to avoid the risk of an economic downturn.
The real GDP growth rate in the United States in 1998 was 4.5%, and it remained strong in the midst of an uncertain global environment.After the rate cut, the consumer price index in the United States rose from 161.6 points in 1998 to 168.3 points in 1999. The year-on-year growth rate was 1.55% compared to 1997, and 2.68% compared to 1998.
③ 2001-2003 - Rate cut cycle in response to the impact of the IT bubble and simultaneous multiple terrorist attacks
From 2001 to 2003, the US economy faced multiple challenges such as the collapse of the IT bubble, simultaneous multiple terrorist attacks, and subsequent economic downturn. In response to these shocks, the FRB significantly lowered interest ratesand implemented a series of monetary easing policies aimed at promoting economic growth and stabilizing the financial markets.The FRB swiftly took action to stabilize the market through further rate cuts and liquidity injections.
These measures helped alleviate the worst-case scenario of the economic shock, but in 2002 there was a persistent delay in economic recovery, including a slump in corporate investment, declining consumer confidence, and ongoing rise in unemployment rate. By 2003, gradual economic recovery and signs of improvement in the housing market were seen due to the continued monetary easing policies.
However, inflationary pressures remain low.Deflationary risks remain.Overall, the policy of the FRB was effective in preventing further deterioration of the economy, but the recovery process remains challenging.
From 2001 to 2003, the US economy faced multiple challenges such as the collapse of the IT bubble, simultaneous multiple terrorist attacks, and subsequent economic downturn. In response to these shocks, the FRB significantly lowered interest ratesand implemented a series of monetary easing policies aimed at promoting economic growth and stabilizing the financial markets.The FRB swiftly took action to stabilize the market through further rate cuts and liquidity injections.
These measures helped alleviate the worst-case scenario of the economic shock, but in 2002 there was a persistent delay in economic recovery, including a slump in corporate investment, declining consumer confidence, and ongoing rise in unemployment rate. By 2003, gradual economic recovery and signs of improvement in the housing market were seen due to the continued monetary easing policies.
However, inflationary pressures remain low.Deflationary risks remain.Overall, the policy of the FRB was effective in preventing further deterioration of the economy, but the recovery process remains challenging.
The market witnessed the collapse of the IT bubble in 2001. During this period, the stock market crash had ripple effects on the real economy, leading to a gradual contraction in GDP, an increase in the unemployment rate, and an 8-month recession. The subsequent simultaneous terrorist attacks further worsened the economic issues.
In January 2001, the FRB initiated a significant interest rate cut cycle in response to the collapse of the IT bubble and its aftermath.During this period, the Federal Funds Rate was reduced from 6.50% to 1.75% in December 2001, ultimately reaching 1% further by June 2003.FRB started a substantial rate cut cycle.
During this period, the Federal Funds Rate was reduced from 6.50% to 1.75% in December 2001, ultimately reaching 1% further by June 2003.A total reduction of 500 basis points.This series of interest rate cuts was aimed at stimulating economic growth by reducing borrowing costs and helping the recovery from the recession in the US economy.
The real GDP growth rate in the US in 2002 was sluggish at 1.7%, but by 2004, when the effects of the interest rate cuts gradually appeared, the GDP growth rate had recovered to 2.9%.Subsequently, the US economy further recovered in a low interest rate environment, and the GDP growth rate reached 3.85% in 2004.The US economy further recovered, and the GDP growth rate reached 3.85% in 2004.
④ Interest rate cut cycle following the subprime mortgage crisis and subsequent global financial crisis in 2007-2008.
From 2007 to 2008, a global financial crisis erupted, which had a serious impact on the US economy.The main causes of the crisis were the collapse of the housing market, the freeze of the credit market, and the vulnerability of the financial market.It was.
Up to that point, the residence market in the usa had been flourishing for a long time, but the subprime loan problem exposed, causing housing prices to fall, and a surge of debtors who fell into insolvency triggered the subprime loan crisis. Financial institutions suffered significant damage from holding high-risk loans, credit markets tightened, and liquidity dried up.
In order to enhance market liquidity, the FRB responded to the crisis by rapidly lowering interest rates from 5.25% in September 2007 to 0-0.25% by the end of 2008. In March 2008, it supported JP Morgan's acquisition of the financially troubled Bear Stearns, and avoided further collapse of the financial system.
However, the market turmoil did not subside, and in September 2008, Lehman Brothers filed for bankruptcy, causing a panic in the world's financial markets. Despite large-scale rescue measures by the FRB and the government, the economy rapidly shrank, and the unemployment rate exceeded 10%. This global recession demonstrated the complexity and difficulty in dealing with the global financial system.
In January 2001, the FRB initiated a significant interest rate cut cycle in response to the collapse of the IT bubble and its aftermath.During this period, the Federal Funds Rate was reduced from 6.50% to 1.75% in December 2001, ultimately reaching 1% further by June 2003.FRB started a substantial rate cut cycle.
During this period, the Federal Funds Rate was reduced from 6.50% to 1.75% in December 2001, ultimately reaching 1% further by June 2003.A total reduction of 500 basis points.This series of interest rate cuts was aimed at stimulating economic growth by reducing borrowing costs and helping the recovery from the recession in the US economy.
The real GDP growth rate in the US in 2002 was sluggish at 1.7%, but by 2004, when the effects of the interest rate cuts gradually appeared, the GDP growth rate had recovered to 2.9%.Subsequently, the US economy further recovered in a low interest rate environment, and the GDP growth rate reached 3.85% in 2004.The US economy further recovered, and the GDP growth rate reached 3.85% in 2004.
④ Interest rate cut cycle following the subprime mortgage crisis and subsequent global financial crisis in 2007-2008.
From 2007 to 2008, a global financial crisis erupted, which had a serious impact on the US economy.The main causes of the crisis were the collapse of the housing market, the freeze of the credit market, and the vulnerability of the financial market.It was.
Up to that point, the residence market in the usa had been flourishing for a long time, but the subprime loan problem exposed, causing housing prices to fall, and a surge of debtors who fell into insolvency triggered the subprime loan crisis. Financial institutions suffered significant damage from holding high-risk loans, credit markets tightened, and liquidity dried up.
In order to enhance market liquidity, the FRB responded to the crisis by rapidly lowering interest rates from 5.25% in September 2007 to 0-0.25% by the end of 2008. In March 2008, it supported JP Morgan's acquisition of the financially troubled Bear Stearns, and avoided further collapse of the financial system.
However, the market turmoil did not subside, and in September 2008, Lehman Brothers filed for bankruptcy, causing a panic in the world's financial markets. Despite large-scale rescue measures by the FRB and the government, the economy rapidly shrank, and the unemployment rate exceeded 10%. This global recession demonstrated the complexity and difficulty in dealing with the global financial system.
The deteriorating economic situation had a serious impact on the labor market.From 2007 to 2008, especially in the latter half of 2008, the financial crisis intensified, leading to a sharp rise in the unemployment rate in the usa. At the same time, the risk of deflation became apparent due to the economic downturn.
At the same time,The economic downturn brought about a clear deflationary risk.。
As a result, the Federal Reserve began a significant cycle of interest rate cuts in September 2007.The purpose was to address the risks of financial market turmoil and economic recession that stemmed from the subprime mortgage crisis.So, During this period, the Federal Funds rate was gradually reduced from 4.75% to 0.25% by December 2008, with a total of 450 basis points cut.Done.
The objective of this series of rate cuts was to stimulate economic activity, stabilize financial markets, and reduce borrowing costs in order to mitigate the adverse effects of the crisis on the economy.
Despite the gradual implementation of rate cuts by the Federal Reserve since September 2007,The GDP growth rate of the United States in 2007 decreased to 1.9%.Due to the outbreak of a full-scale financial crisis, the GDP growth rate in 2008 further declined to 0.1%, indicating a serious contraction in economic activity. However, a moderate monetary policy laid the foundation for economic recovery.From 2010 onwards, the GDP growth rate of the United States gradually recovered.Done.
In 2019-2020, a preemptive interest rate cut cycle was implemented in response to the liquidity crisis.
The FRB began an interest rate cut cycle in August 2019. Initially, the FRB's goal was to address the challenges posed by the global economic slowdown and trade uncertainty.Challenges posed by the global economic slowdown and trade uncertainty.The purpose was to address the challenges posed by the global economic slowdown and trade uncertainty.
However, in the early 2020s, the new coronavirus spread and the world economy rapidly fell into crisis. The spread of the new coronavirus led to large-scale economic lockdowns and labor stoppages, disruptions in the global supply chain, sharp decreases in consumer demand, soaring unemployment rates, and significant weakening of economic activity. The economic impact of the pandemic made the financial markets extremely vulnerable. The financial markets were severely disrupted.
Therefore, the Federal Reserve lowered interest rates and substantially expanded its balance sheet to support the government's large-scale fiscal stimulus.During this cycle, the Federal Funds Rate was gradually reduced from 2.25% to 0.25% in March 2020.Subsequently, as the measures to deal with the coronavirus gradually improved, the economy began to recover slowly in the second half of the year.
The Federal Reserve implemented several interest rate cuts in 2019, but the U.S. economy overall remained strong, with GDP growth rate slightly below the average at 2.3%. However, the spread of the coronavirus and the implementation of import restrictions dealt a significant blow to the U.S. economy.
As a result, the Federal Reserve began a significant cycle of interest rate cuts in September 2007.The purpose was to address the risks of financial market turmoil and economic recession that stemmed from the subprime mortgage crisis.So, During this period, the Federal Funds rate was gradually reduced from 4.75% to 0.25% by December 2008, with a total of 450 basis points cut.Done.
The objective of this series of rate cuts was to stimulate economic activity, stabilize financial markets, and reduce borrowing costs in order to mitigate the adverse effects of the crisis on the economy.
Despite the gradual implementation of rate cuts by the Federal Reserve since September 2007,The GDP growth rate of the United States in 2007 decreased to 1.9%.Due to the outbreak of a full-scale financial crisis, the GDP growth rate in 2008 further declined to 0.1%, indicating a serious contraction in economic activity. However, a moderate monetary policy laid the foundation for economic recovery.From 2010 onwards, the GDP growth rate of the United States gradually recovered.Done.
In 2019-2020, a preemptive interest rate cut cycle was implemented in response to the liquidity crisis.
The FRB began an interest rate cut cycle in August 2019. Initially, the FRB's goal was to address the challenges posed by the global economic slowdown and trade uncertainty.Challenges posed by the global economic slowdown and trade uncertainty.The purpose was to address the challenges posed by the global economic slowdown and trade uncertainty.
However, in the early 2020s, the new coronavirus spread and the world economy rapidly fell into crisis. The spread of the new coronavirus led to large-scale economic lockdowns and labor stoppages, disruptions in the global supply chain, sharp decreases in consumer demand, soaring unemployment rates, and significant weakening of economic activity. The economic impact of the pandemic made the financial markets extremely vulnerable. The financial markets were severely disrupted.
Therefore, the Federal Reserve lowered interest rates and substantially expanded its balance sheet to support the government's large-scale fiscal stimulus.During this cycle, the Federal Funds Rate was gradually reduced from 2.25% to 0.25% in March 2020.Subsequently, as the measures to deal with the coronavirus gradually improved, the economy began to recover slowly in the second half of the year.
The Federal Reserve implemented several interest rate cuts in 2019, but the U.S. economy overall remained strong, with GDP growth rate slightly below the average at 2.3%. However, the spread of the coronavirus and the implementation of import restrictions dealt a significant blow to the U.S. economy.
The GDP growth rate in 2020 experienced a historic contraction, reaching -3.4%, the worst contraction rate since the 2008 financial crisis.
The GDP growth rate in 2020 experienced a historic contraction and reached -3.4%, the worst contraction rate since the 2008 financial crisis.It became -3.4%, the worst contraction rate since the 2008 financial crisis.In 2021, with the easing environment accelerating, the US economy rapidly recovered.As a result, the GDP growth rate reached 5.7%.
- moomoo news Evelyn
Source: moomoo
This article uses auto-translation in part.
The GDP growth rate in 2020 experienced a historic contraction and reached -3.4%, the worst contraction rate since the 2008 financial crisis.It became -3.4%, the worst contraction rate since the 2008 financial crisis.In 2021, with the easing environment accelerating, the US economy rapidly recovered.As a result, the GDP growth rate reached 5.7%.
- moomoo news Evelyn
Source: moomoo
This article uses auto-translation in part.
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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Mr スコップ : In the end, it means that you will feel down at first, but eventually things will improve. Thank you for the advice ♪