ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Fed rate cuts are designed to lower interest rates throughout the economy and make it cheaper to borrow money. As a result, newly issued debt securities offer lower interest rates to holders while existing debt that carries higher interest rates may trade at a premium-that is, prices in the secondary market may rise.

Detailed explanation-2: -When inflation is too high, the Federal Reserve typically raises interest rates to slow the economy and bring inflation down. When inflation is too low, the Federal Reserve typically lowers interest rates to stimulate the economy and move inflation higher.

Detailed explanation-3: -Key Takeaways Central banks cut interest rates when the economy slows down in order to reinvigorate economic activity and growth. Rates go up when the economy is hot. The goal of cutting rates is to reduce the cost of borrowing so that people and companies are more willing to invest and spend.

Detailed explanation-4: -To curb inflation. The Federal Reserve, the nation’s central bank, can’t help fix supply problems, but it can help slow the demand part of the inflation equation.