Yesterday, the main European stock markets fell sharply due to the decision of the American Federal Reserve (Fed) on Wednesday and the revision of its monetary easing projections for 2025.
If the Fed lowered its rates by 25 basis points as expected, bringing the federal funds target to a range of 4.25 to 4.50%, its President Jerome Powell also suggested that the pace of easing monetary policy would slow down.
The US central bank’s new projections now call for only two additional reductions of a quarter of a percentage point by the end of 2025 compared to a previous forecast of four reductions.
The neutral rate is now estimated at 3% by these officials compared to 2.5% previously.
Clearly, the FED has just told the markets that rates will not go below 3%.
The FED has managed to normalize its rates and get out of negative rates which is a good thing, because negative rates are a major economic aberration since it amounts to being paid to borrow, and this makes any investment useless and unprofitable, creates and fuels speculative bubbles and so on.
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Source Reuters via Boursorama.com ici
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