Deciphering FOMC rate-cut rationale, Digital currencies special report
Commentary: Deciphering FOMC rate-cut rationale
By Mark Sobel in Washington
It’s not easy steering monetary policy given the need to anticipate the future amid tweets and challenges to central bank ‘independence’, persistently low inflation despite strong labour markets, low potential growth and global trade uncertainties.
Financial market participants mainly expect a 25 basis point cut in the fed funds rate at the end-July Federal Open Market Committee meeting. But the subsequent outlook for further cuts beyond July is clouded. Some expect another two or even three rate cuts. However, the economic case is unclear.
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Special report: Digital currencies
The use of cryptocurrencies in the retail domain is underpinned by participants’ desire to decentralise the monetary system. Much of the motivation behind non-sovereign currencies stems from the 2008 financial crisis. From a central bank perspective, privately issued cryptocurrencies are not currencies. The usability of these crypto-assets diminishes as they become speculative vehicles with volatile purchasing power. Central bank digital currencies, denominated in an established fiat currency, could overcome this fundamental barrier.
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