Reuters: For Fed, sell-off could point to fading Trump stimulus

Article published: Oct 23, 2018

IB Economics syllabus: Macroeconomics  (economic growth, monetary policy)

The Fed (Central Bank of the United States) is in the process of increasing interest rates. This is definitely necessary as the U.S. economy is getting close to overheating, expanding “at an annualized 4.2 percent rate, more than twice its potential.” However, as Trump’s fiscal stimulus “from U.S. tax cuts and government spending will fade sooner than expected,” it might be a better option to wait a bit with further interest rate hikes in order not to risk a larger drop in economic growth.

Source of image: REUTERS/Al Drago

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