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US Economic Challenges: Moody's Downgrade and the Fed's Interest Rate Dilemma

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October 7, 2023

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1. Moody's Downgrade and Rising Economic Uncertainties:

Moody's has downgraded the credit outlook of the United States from "stable" to "negative," driven by the increasing burden of debt interest costs and significant political and economic uncertainties. This action has raised concerns both within the United States and internationally about the country's future prospects. The downgrade reflects growing global anxiety about the U.S. economy, regardless of whether Moody's adjusted its rating. 段落图片2

2. Federal Reserve's Interest Rate Policy and Internal Debate:

Recently, Federal Reserve Chairman Jerome Powell strongly advocated for continued interest rate hikes, a stance echoed by his unwavering support for this policy. However, there is a notable division within the Federal Reserve regarding whether to continue raising rates to curb inflation. Some argue that inflation can be brought back to the target rate of 2% without further rate hikes, while others believe in the necessity of increased rates to control inflation. Powell's firm position in favor of rate hikes has further elevated his prominence as the Federal Reserve Chairman. 段落图片3

3. The End of the Road for U.S. Interest Rate Hikes:

As the debate rages on, the situation points to the potential end of the road for U.S. interest rate hikes. The continuous increase in rates has led to a significant expansion in the cost of debt interest, pushing the U.S. economy towards a major recession. Despite Powell's dedication, the decision to hike rates is a collective one within the Federal Reserve. With the mounting economic challenges and increased scrutiny, Powell may need to undertake drastic actions to maintain stability and confidence in the U.S. monetary policy and the broader economy.