Fed's Rate Cuts at 3.7% Unemployment Almost Unprecedented

Fed's Rate Cuts at 3.7% Unemployment Almost Unprecedented

At its most recent meeting at the end of July, the Fed lowered its benchmark interest rate by a quarter of a point. That action was somewhat surprising. Normally when times are good and the unemployment rate is at a 50-year low, the Fed raises interest rates as a defense against inflation. Economic models have shown that when the unemployment rate gets below a certain level, unless the Fed acts promptly, inflation will accelerate and be hard to contain. We are now well below that alleged danger point. Thus, for the Fed to cut rates when unemployment is at 3.7 percent and the economy is growing at a reasonable rate is almost unprecedented.

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