<p>No, interest rates are cut in order to stimulate spending, by making borrowing cheaper. The most modern monetary policy scheme is for the central bank to control the interest rate, with an eye on targeting a specific level of inflation. Lower interest rates increase the rate of money supply, which puts upward pressure on inflation. Higher interest rates reign in inflation.</p>
<p>So, interest rates are directly related to inflation targets, but they can be dropped in order to stimulate a slow economy. Inflation tends to be higher in an overheated fast-growing economy.</p>

CC BY-SA 4.0
2024-09-30T02:26:15.397Z
Sorry, downvote was from me by mistake. I was browsing on the phone and accidentally hit the wrong button. If you make a minor edit, I would be able to reverse the downvote to an upvote.
Herr K.
CC BY-SA 4.0
2024-09-29T04:54:33.723Z
2024-09-30T14:42:17.553Z
2024-09-30T14:42:17.553Z
ahorn
<p>Does the Fed cut rates during a strong economy? Why or why not? Thanks.</p>

CC BY-SA 4.0
2024-09-23T13:48:04.007Z
How do you define 'strong' economy? Fed makes choices based on inflation and output gap.
1muflon1
<federal-reserve><united-states><fed-funds-rate>
Does the Fed cut rates in a strong economy?
HelloDarkWorld
# Does the Fed cut rates in a strong economy?

(Asked by: username_0 on 2024-09-23)

Does the Fed cut rates during a strong economy? Why or why not? Thanks.

**Tags:** federal-reserve, united-states, fed-funds-rate

> **Comments:**
> **username_1**: How do you define 'strong' economy? Fed makes choices based on inflation and output gap.  

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## 1 answers

### Answer by username_2 on 2024-09-29. Score: 3 | Accepted answer

No, interest rates are cut in order to stimulate spending, by making borrowing cheaper. The most modern monetary policy scheme is for the central bank to control the interest rate, with an eye on targeting a specific level of inflation. Lower interest rates increase the rate of money supply, which puts upward pressure on inflation. Higher interest rates reign in inflation.

So, interest rates are directly related to inflation targets, but they can be dropped in order to stimulate a slow economy. Inflation tends to be higher in an overheated fast-growing economy.

> **Comments:**
> **username_3**: Sorry, downvote was from me by mistake. I was browsing on the phone and accidentally hit the wrong button. If you make a minor edit, I would be able to reverse the downvote to an upvote.  

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