Currently, there is higher risk that the American economy will slow down rather than growing inflation. The outlook for the future is uncertain due to the “renewed turbulence” on financial markets, said the Fed’s Chairman yesterday during his speech in Charlotte, North Carolina. That confirmed speculation that the US central bank might decrease interest rates one more time as soon as next month.

Since inflation is under control, the Fed needs to focus on the economy, which is certainly slowing down. Yesterday’s GDP reading showed that the US economy is growing at 4.9% on a quarterly basis but analysts expect it will slow down to 1.5% in the last quarter. Another impulsive interest rate cut could move the markets and spur investments. The Fed also needs to keep in mind the tough situation of consumers who are repaying their mortgages.

That is why the US economy needs a kick. The “recession” on the housing market, higher gas prices, tighter credit conditions and declines of stock prices can create some problems for consumers in the next couple of month.

The Federal Open Market Committee will decide on the level of interest rates in the US on December 11^th. Currently interest rates in the US stay at 4.50%, after two cuts of 50 and 25 basis points.

Adam Narczewski