Question

What is the FED and the IBC doing now with interest rates? how are they promoting global growth or protectionism?

Answer 1

The FED and the IBC are looking at interest rates from inflation point of view. As the inflation in the US is increasing over the last few quarters, the US Federal Reserve is increasing interest rate and tightening the liquidity. In order to contain the inflation US fed started increasing interest rates in 2016. After the recession in 2008, for nearly eight years the interest rates in the US were near zero which helped liquidity drive the US financial markets into a continuous bull run.

However, with the increase in interest rates, liquidity reduces and the performance of financial market reduces. However, global growth rates are inching up. As per the International Monetary Fund (IMF), the current global growth rate is 3.1% which has been the highest in the past few years. This should be a positive for the financial markets.

On the other hand, protectionist policies like the trade war with china, Tariffs on steel imports that are being passed by the present administration are seen to be hurting the US economy in the short term.