Tech
Was the Fed justified in cutting rates by 50 basis points? Here’s what AI and Deutsche Bank think.
The Federal Reserve’s big interest-rate cut of 50 basis points this week to kick off its monetary-policy easing cycle looks harder to justify than those in 2001 and 2007, according to Deutsche Bank’s Jim Reid.
In the January 2001 and September 2007, the half-percentage-point rate cuts “happened just 3-4 months before the US economy was in recession,” Reid, global head of economics and thematic research, wrote in a Friday client note. “So there’s been some nerves about whether we’re in for a repeat.”
Digging deeper, Reid (with the help of AI) pored over past financial news and economic data to conclude that Wednesday’s cut of 50 basis points looks harder to justify than previous ones. The result was a “traffic stop” visual analysis showing how justifiable the bigger cut looks when broken down into aggressive (red), inconclusive (amber) or easily justifiable (green).
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