You can see monetary policy in action today. The FED (Federal Reserve) is making its interest rate decision in the afternoon.
Once every about 6 weeks the Federal Open Market Committee (FOMC) holds a meeting to decide on short term interest rates, the so called Federal Funds Rate. It is a rate at which banks lend reserves to each other overnight. The FOMC sets the target for the rate (which is 0.25% wide) and intervenes in the overnight market to make sure that the actual transactions between banks meet the target. The general expectation is that they will lower the interest rate by 0.25%, to the range 1.75%-2%. This follows a reduction by 0.25% on July 31 - the first in over 10 years.
What are the reasons for the reductions? The world economy is weaker; growth in China and in the EU has slowed down, and the tariff war between US and China is a major source of uncertainty. Add to this Brexit uncertainty and the attack in Saudi Oil facilities and the FED thinks it is prudent to get ahead of a potential slowdown in the US economy.
Read about it here
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