On Wednesday (Sept. 18), the Federal Reserve cut its key interest rate for the first time in four years, an action a WVU economist said will benefit both consumers and businesses. (WVU Photo/Jennifer Shephard)
A West Virginia University economist sees a multitude of potential benefits from the Federal Reserve’s half-point interest rate cut Wednesday (Sept. 18), a larger than expected reduction intended to help cushion the U.S. economy.
Arabinda Basistha, associate professor of economics at the WVU John Chambers College of Business and Economics, called the central bank’s action a “strong step in the right direction” for regulating inflation and unemployment.
Basistha’s areas of expertise include inflation, labor markets and monetary policy. He teaches graduate and undergraduate courses in macroeconomics and international macroeconomics.
Quotes:
“The 50 basis point cut — half a percentage point, enacted by the Federal Reserve, is a strong step in the right direction. The Federal Reserve faced a difficult balancing act of responding to a slowing job market in the U.S. and an inflation rate that is not back to the 2% level yet.
“The sharp lowering of interest rates should primarily help consumers buying, or planning to buy, products that involve getting a loan or using credit cards. That covers a wide range of goods like cars, household appliances, computers, etc.
“In anticipation of the interest rate cut, mortgage rates have already come down somewhat, which should help the housing sector. Lower borrowing costs may also help businesses reduce their funding costs for expansion, especially in the manufacturing sector.
“Overall, the interest rate cut is well-timed and significant, and it should help both consumers and businesses. It will offer a necessary adjustment towards stability in the economy along with the help provided by already low gas prices. Real estate and manufacturing sectors of the Mid-Atlantic region should benefit from this decision.
“The financial markets instantly responded positively to the news, although the longer-term effects remain uncertain. The large cut could be also viewed as an unintended signal that the Fed is more worried about the real economy than it has communicated until now.” — Arabinda Basistha, associate professor, economics, WVU John Chambers College of Business and Economics
West Virginia University experts can provide commentary, insights and opinions on various news topics. Search for an expert by name, title, areas of expertise or college/school/department in the Experts Database at WVUToday.
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