Economics: Monetary Policy - Enough Is Enough

 (Drivebycuriosity) - Last week the Fed cut again her interest rates - the third cut in just 3 months - but they declared that this should be the last reduction in foreseeable future. The announced pause is the right decision - there are no more cuts needed. Enough is enough.

Apparently the recent interest rat cuts serve as an insurance. The Fed wants to cover the risk that the trade war escalates and pushes then the global economy into a worldwide recession. But in the moment we get rather signs that the trade war could be confined and last Friday´s strong US job market report confirmed that the US economy is still doing well. There is rather the risk that the Fed already overshot and pushed her interest rates too low.

A too expansive monetary policy - by ulta-low interest rates - in combination with a tight labor market and climbing oil prices could easily restart the almost forgotten inflation. In this case the Fed would need to hit the brakes again which could cause the next recession.