The Fed Cuts Loose?

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For the first time in more than a decade, the U.S. Federal Reserve may cut interest rates next week — even though it's not clear that the economy needs it. Instead the Fed is worried that the U.S. economy will be harmed later this year by weakening economic growth in other countries, by trade wars, and by other factors. It's an "insurance" cut, meant to bolster the economy against weakness in the future rather than in the present.

To justify the rate cut, the Fed has been forced to rethink an economic principle that, for decades, has guided monetary policy: the relationship between unemployment and inflation.

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