1

What would happen if the Federal Reserve does not cut interest rates?

Not cutting interest rates by the Federal Reserve could trigger economic recession, stock market volatility, fiscal pressure, and political maneuvering, with specific impacts as follows:

1. Increased risk of economic recession
Federal Reserve Governor Milan warned that if interest rates are not lowered, the U.S. economy may face a recession, with unemployment rates possibly exceeding expectations. Trump is also concerned that high interest rates will squeeze consumption and employment, creating a vicious cycle.

2. Pressure on stock markets and fiscal conditions
‌Stock Market‌: U.S. stocks are highly dependent on expectations of interest rate cuts; maintaining high interest rates will compress corporate profits, investor confidence will be undermined, and market value could evaporate by over a trillion dollars.
‌Fiscal‌: U.S. national debt exceeds $35 trillion, with annual interest expenses exceeding $1 trillion; high interest rates will exacerbate the fiscal deficit.

3. Political and market maneuvering
‌Politics‌: The relationship between the Federal Reserve and the White House may become tense, and Trump may pressure the Federal Reserve, even intervening in personnel matters.
‌Market‌: Dollar assets are highly attractive, but interest rate cuts could trigger a depreciation of the dollar and a global sell-off of U.S. bonds.

4. Long-term inflation and bubble risks
If the Federal Reserve cuts interest rates prematurely due to political pressure, it could exacerbate inflation and financial bubbles, impacting the credibility of the dollar.