Given the current state of the US economy, it appears the odds are high that we will be seeing another US rate cut this week.

The FOMC has already cut US rates at its last two meeting and experts believe it will be happening again this week when the committee meets.

There are a few reasons for this that we should first consider.

The first one is of course inflation. To me, this is an interesting metric. As it stands, inflation in the US is sitting at 2.8%. That is above their target rate of 2.0%.

That said we have seen signs of it weakening recently and that won’t be something the FOMC would want.

But given that it is relatively healthy compared to its target makes for an interesting debate.

At the same time jobs growth, which many would say is a leading indicator appears to be slowing as well.

But at the same time, the unemployment rate is at 3.5%. Incredibly low by historic standards.

So why exactly are the FOMC looking to cut?

Well, the big fear is that we could see a US recession next year. Or at least falling GDP growth. GDP growth has probably been one of the key metrics that hasn’t impressed.

It is still sitting at healthy levels, but many economists are expecting it to fall in 2020.

The US is far from recession level in my opinion, but in terms of the numbers, they would want to see this number growing QoQ. A recession is technically two consecutive periods of negative economic growth.

So that would be a key reason for a further cut. 

But in truth, things in the US are not going too badly, notwithstanding the US-China trade wars and the political turmoil of course.