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Fed’s move to cut interest rate seen ‘mistake’– JP Morgan

Fed’s move to cut interest rate seen ‘mistake’– JP Morgan

Mubasher: The US Federal Reserve was “fundamentally making a mistake” with its move to cut borrowing costs, according to a senior JP Morgan analyst.

Expectations across the market are for the US central bank to cut interest rates at its next meeting on 30 and 31 July.

JP Morgan Asset Management chief global strategist David Kelly does not regard cutting interest rates as boosting the growth of the US economy and the widely anticipated move was partially motivated by political pressure from the White House on Fed Chairman Jerome Powell.

“Chairman Powell admits that really it is fiscal policy that has any possibility at all of stimulating the economy,” Kelly said, adding that the economy would not need to be boosted at a time when jobless rate was at 3.7%.

US President Donald Trump reportedly considered removing Powell from his position, whereas the Fed’s head re-affirmed during a Congressional testimony that he planned to serve his full term.

“I think they’re worried about getting too criticized by the administration,” Kelly said, adding that the Fed officials seemed “obsessed” with inflation, which remained below the target rate of 2%.