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 butpersistent raising of rates may be the reason behind the slowdown in U.S. growth and the lacklustreinflation numbers. The American economy created a mere 20,000 jobs in February, the slowest growth in jobs in well over a year, and GDP growth in the coming quarters is expected to slow considerablyfrom 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.
MEANINGS AND WORDS
Meaning : contemptuous treatment or behaviour; outrage(n).
Synonyms : against
Antonyms : exalt
Example : “the despite done by him to the holy relics”
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”
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”
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”
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”
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”
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”
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”
Meaning : become progressively worse.
Synonyms : decline
Antonyms : approve
Example : “relations between the countries had deteriorated sharply”
Meaning : pay no attention to; ignore(v).
Synonyms : disobey
Antonyms : regard
Example : “the body of evidence is too substantial to disregard”
Meaning : causing or tending to cause disruption.
Synonyms : disturbing
Antonyms : disciplined
Example : “disruptive pupils”