the-biggest-risk-to-global-markets

The biggest risk to global markets

The US government's fiscal stimulus package is unlikely to work, which means it is up to the Fed to stablise the US economy - and the financial markets.
A consensus has been formed among US political and monetary authorities on the need for a temporary fiscal boost to help the economy avert a recession. Meanwhile, the US Fed is cutting interest rates.

In the past, such a combination of aggressive interest rate cuts and government efforts to boost economic activity has worked to pull the economy out of the doldrums. For example, during the Savings Loan SL crisis in the late 1980s and early 1990s, it was the combination of deep Fed rate cuts by a total of 525bps, from 8.25% to 3% and government intervention in the form of setting up the Resolution Trust Corporation that finally boosted public confidence, revived...
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