President Trump has urged the Federal Reserve to reduce the federal funds rate from its current range of 4.25%-4.50% to just 1%. This dramatic cut is viewed skeptically by Wall Street, as it would likely thrust long-term Treasury yields higher and raise inflation expectations. A rate this low associates with economic crises, leading to possible market turmoil and negative business responses. Analysts caution that such low rates might cause companies to hesitate in their expansion plans, worried about underlying economic issues.
"A rate that low would boost inflation expectations and send long-term Treasury yields higher, but also send a signal that something extreme may be developing in the economy."
"It would trigger immense turmoil in financial markets and the economy."
"Cutting rates too low, too prematurely, too early would do exactly what you don't want to happen."
"I'm definitely saying, 'what do you know that I don't?'"
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