#FedRateCutAffectsDollarTrend The Federal Reserve (Fed) can cut interest rates for several reasons, depending on economic conditions. Here are the main factors that typically lead to a Fed rate cut: 1. Economic Slowdown or Recession • If economic growth slows down significantly or the U.S. enters a recession, the Fed may lower rates to stimulate borrowing, investment, and consumer spending. • Example: The Fed aggressively cut rates during the 2008 financial crisis to support economic recovery. 2. High Unemployment • When job growth weakens and unemployment rises, the Fed may lower rates to encourage business expansion and hiring. • Lower rates reduce borrowing costs, making it easier for companies to invest in growth. 3. Low Inflation or Deflation Risks • If inflation falls below the Fed’s 2% target, they may cut rates to encourage spending and investment. • Deflation (a sustained decline in prices) can hurt economic activity, making rate cuts necessary to boost demand.