Why has the Fed cut interest rates?
The Fed has cut interest rates because it is worried by a sharp slowdown in the US economy. Since July, the rate of US economic growth has been cut in half, while consumers and businesses have become more pessimistic about the future. Stock markets have also fallen sharply on fears that the slowdown will hurt profits. The Fed hopes by acting now it can prevent the slowdown turning into a recession. Will the UK follow suit? The deputy governor of the Bank of England, Mervyn King, has said that the Bank’s Monetary Policy Committee would not necessarily follow the US example “What matters to us is the outlook for the British economy. We set interest rates for the UK, not the US,” he said. However, there are widespread expectations in the markets that UK rates will come down eventually – and the Fed move will only increase the pressure. The UK economy is expected to slow down, and inflationary pressures appear muted. At its last meeting, two out of the nine members of the MPC voted for a r
