The US Federal Reserve announced its decision overnight about what it was going to do with interest rates in America.
Australia’s Reserve Bank of Australia (RBA) is in charge of deciding what the interest rate should be for the economy. The US Federal Reserve does the same job in the US. It has been raising interest rates in recent years to make up for the record-lows during the GFC.
US Federal Reserve Interest Rate Decision
Market commentators were thinking that the US Federal Reserve might decrease interest rates after a period of increasing the rate. It is normal procedure to increase interest rates so the economy doesn’t overheat and decrease the interest rate to support the economy.
The trade war in-particular has made investors worry that the US (and indeed the global economy) could be headed downhill.
I think it is a sad state of affairs when people expect the US Fed (and RBA) to step in the moment the economy looks a little shaky, as much as that might support shares like Commonwealth Bank of Australia
(ASX: CBA) and Macquarie Group Ltd (ASX: MQG).
But, regardless of my grumblings, the US Fed decided to hold the interest rate, which I think was the right decision.
Why Did it Not Cut?
Well, US President Donald Trump said in a tweet that he and the Chinese leader had a good conversation before the upcoming G20 meeting, so that may soon signal the end of the trade war. The US Fed was right to wait in my opinion until at least seeing what the result of the talks are.
China’s Xi probably has many years of leading China ahead, whereas President Trump has an election to win next year – he needs to be seen doing the right thing.
With all of the above in mind, that’s why I prefer owning reliable shares, such as the ones in the free report below, that I can be happy owning regardless of what the local, US or global economies are doing.
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