This website uses cookies. Find out more.

  • Contact
  • Client Login
Chase de Vere
Trustpilot
  • Services
    • Advice for you
    • Advice for your business
    • Partner With Us
    • Advice on Personal Injury Awards
    • Advice for Medical Professionals
    • Advice for Dental Professionals
  • About
  • Careers
  • Insights
  • Contact
0345 609 2002 Book Appointment

Advice for you

Advice for your business

Partner With Us


Advice on Personal Injury Awards

(Off-site link)

READ MORE
Advice for Medical Professionals

(Off-site link)

READ MORE
Advice for Dental Professionals

(Off-site link)

READ MORE
Back to Insights
News

Flexing a ten-year old muscle…

15 August 2019
  • Share

The US Federal Reserve has cut its main interest rate for the first time in ten years, but will it have a knock-on effect?

Source: US Federal Reserve

The last time the US central bank, the Federal Reserve, cut its main interest rate was in December 2008, in response to the fallout from the financial crisis. That last drop was preceded by nine interest rate cuts since September of the previous year.

The final 2008 cut, ten days before Christmas, took the Federal Funds rate down from 1.00% to a range of 0.00-0.25%. As the straight line on the graph shows, the rate remained there, just above zero, for the next seven years. It was subsequently gradually nudged up, a quarter of a per cent at a time, reaching 2.25%–2.50% last December.

The new 0.25% cut announced from the beginning of August was widely anticipated, although there were some investors who had forecast a 0.50% reduction. The backdrop to this cut, however, is very different from that of December 2008. Now the US economy is close to full employment and, while growth did cool in the second quarter, it is still running year-on-year at 2.3%. In other times, such conditions would not prompt a rate cut. The central bank is acting now because it wants to prevent the economy slowing any further, at the end of an unusually long period of growth.

On this side of the Atlantic, the European Central Bank has hinted that it could cut interest rates soon. Although the bank took no action in July, it did change its meeting statement to say that it “expects the key ECB interest rates to remain at their present or lower levels at least through the first half of 2020”.

The Bank of England’s next interest rate move remains unclear after maintaining the current rate again for August. The various Brexit scenarios could see rates increased to protect a falling pound or as a gradual return to ‘normality; or rates could be cut to stimulate the economy.

‘Lower for longer’ has been a description of the path of interest rates since 2008. It is now beginning to become ‘lower for ever’. Make sure that if you have cash on deposit beyond a rainy-day reserve, you have a good reason for doing so.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.

Content correct at time of writing and is intended for general information only and should not be construed as advice.

 

  • Share

Related Insights

21 December 2018

New probate fees to affect many estates

The Government has revived plans to…

News
View Article
14 March 2019

Inflation dips below the Bank of England’s target

UK inflation fell below 2% for…

News
View Article
12 September 2019

A bumpy ride for August on the markets

Stock markets, as well as some…

News
View Article

TO FIND OUT HOW CHASE DE VERE CAN HELP YOU ACHIEVE YOUR GOALS, ARRANGE YOUR COMPLIMENTARY CONSULTATION.

ARRANGE APPOINTMENT

Related Services

Advice for you

We offer our clients attentive, focused, financial guidance from highly qualified independent advisers located throughout the UK. Whether you’re saving for the future, enjoying your retirement or fu...

Learn more
JOIN OUR SUBSCRIPTION SERVICE TO RECEIVE:

EDUCATIONAL NEWS UPDATES & UPCOMING EVENTS

By signing up to our email subscription service we will send you regular emails with the latest insights from Chase de Vere. By signing up you are agreeing to our term and conditions that can be found here.

Chase de Vere
  • 0345 609 2002
  • client.services@chasedevere.co.uk
  • Home
  • About
  • Accessibility
  • Cookies
  • Gender Pay Gap Report
  • How to make a complaint
  • Insights
  • Modern Slavery Statement
  • Privacy
  • Terms of Use
  • Linkedin

Disclaimer:

Investments can go up and down in value, so you could get back less than you put in.
The Financial Conduct Authority does not regulate cash flow planning, tax or estate planning.

© Copyright Chase de Vere / 2025