Topic Of The Day:-“Avoiding A Slowdown: On Fed Interest Rates”

Central banks are reversing the direction of their policies in a seemingly coordinated bid

Over the last few days, U.S. Federal Reserve Chairman Jerome Powell has been trying to allay fears that it will continue to raise interest rates notwithstanding conditions in the economy. Many, including President Donald Trump, have been quite critical of the Fed raising rates despite a slowing economy and inflation staying well below its official target of 2%. In fact, many have argued that the gradual but persistent raising of rates may be the reason behind the slowdown in U.S. growth and the lacklustre inflation numbers. The American economy created a mere20,000 jobs in February, the slowest growth in jobs in well over a year, and GDP growth in the coming quarters is expected to slow considerably from the rate of 3.4% in the third quarter last year. On Sunday, however, Mr. Powell termed the current interest rate level as “appropriate”, and noted that the Fed does “not feel any hurry” to raise rates further. The Fed Chairman’s remarks come around the tenth anniversary of the historic bull market in U.S. stocks, which began in March 2009 after policy rates were cut aggressively in order to fight the recession. This marks a significant change from Mr. Powell’s hawkish policy stance since taking over last year.

But right now it is not just the Fed that has put the brakes on the normalisation of monetary policy through a gradual tightening of short-term interest rates. As economic conditions in Europe and Asia begin to deteriorate, central banks have been quick to turn more dovish.European Central Bank President Mario Draghi last week announced that rates in Europe will be kept low until next year and offered to lend cheaply to European banks. The People’s Bank of China has promised further monetary stimulus measures to stem the fall in growth, and the Reserve Bank of India has started to cut interest rates as growth has slowed down each successive quarter this fiscal ahead of the general election. It should thus be obvious by now that central banks around the world are reversing the direction of their policies in what seems to be a coordinated effort to avoid a global growth slowdown. The brakes applied to the raising of interest rates by the Fed allows other central banks to lower their own policy rates and boost growth without the fear that disruptive capital flows could wreak havoc on their economies. While such coordinated monetary policy can certainly prevent slowdowns, it also raises the risk of extended periods of low interest rates leading to more destructive bubbles.


1) despite

Meaning: contemptuous treatment or behaviour; outrage(n).

Synonyms: against

Antonyms: exalt

Example: “the despite done by him to the holy relics”

2) persistent

Meaning: continuing firmly or obstinately in an opinion or course of action in spite of difficulty or opposition(adj).

Synonyms: constant

Antonyms: broken

Example: “one of the government’s most persistent critics”

3) lacklustre

Meaning: lacking in vitality, force, or conviction; uninspired or uninspiring(adj).

Synonyms: drab

Antonyms: bright

Example: “no excuses were made for the team’s lacklustre performance”

4) mere

Meaning: used to emphasize how small or insignificant someone or something is(adj).

Synonyms: pure

Antonyms: indefinite

Example: “questions that cannot be answered by mere mortals”

5) considerably

Meaning: by a notably large amount or to a notably large extent; greatly(adv).

Synonyms: substantially

Antonyms: insignificantly

Example: “things have improved considerably over the last few years”

6) aggressively

Meaning: in a manner resulting from or betraying aggression(adv).

Synonyms: strenuously

Antonyms: mildly

Example: “he resisted violently and continued to behave aggressively in the police car”

7) recession

Meaning: a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.

Synonyms: deflation

Antonyms: increase

Example: “the country is in the depths of a recession”

8) stance

Meaning: the way in which someone stands, especially when deliberately adopted (as in cricket, golf, and other sports); a person’s posture.

Synonyms: posture

Antonyms: truancy

Example: “she altered her stance, resting all her weight on one leg”

9) deteriorate

Meaning: become progressively worse.

Synonyms: decline

Antonyms: approve

Example: “relations between the countries had deteriorated sharply”

10) disregarded

Meaning: pay no attention to; ignore(v).

Synonyms: disobey

Antonyms: regard

Example: “the body of evidence is too substantial to disregard”

11) disruptive

Meaning: causing or tending to cause disruption.

Synonyms: disturbing

Antonyms: disciplined

Example: “disruptive pupils”

12) havoc

Meaning: widespread destruction(n).

Synonyms: calamity

Antonyms: blessing

Example: “the hurricane ripped through Florida causing havoc”

13) destructive

Meaning: causing great and irreparable damage.

Synonyms: harmful

Antonyms: assisting

Example: “the destructive power of weapons”