Key points
- Often follows a hiking cycle once the economy weakens or inflation falls.
- Has usually supported shares and bonds, and tended to weaken the currency.
- Can begin before a recession, or in the middle of one.
Example
In March 2020 the Fed cut rates by 150 bp in under two weeks (an emergency 50 bp cut, then 100 bp) to cushion the pandemic shock.
In history
The 2019-2020 cutting cycle saw 3 "insurance cuts" in 2019, followed by emergency cuts to 0% in March 2020 during COVID.
Related terms