Interview: Market jitters as Fed’s rate cut heightens inflation concerns, says analyst

ISTANBUL, Sept. 24 (Xinhua) — Market participants remain uneasy as the U.S. Federal Reserve cut interest rates by 50 basis points on Wednesday, amidst growing uncertainties in the U.S. economy, said a Turkish analyst.
Typically, when markets receive more than expected — like a 50-basis point cut instead of a 25-basis point — it should generate positivity, Murat Tufan, an analyst with the EkoTurk broadcaster, told Xinhua in a recent interview.
“However, following this rate cut, confusion arose in the markets as investors expressed distrust in the Fed,” he said. “They question the true state of the economy and whether the significant decline in policy rates indicated deeper underlying concerns.”
The Fed’s decision, its first rate cut in over four years, was prompted by cooling inflation and a weakening labor market, surpassing expectations of a 25-basis point reduction.
Tufan believes that the Fed’s “early and aggressive” easing of monetary policy is raising concerns about potential inflationary pressures, particularly as global inflation levels remain elevated and purchasing power continues to lag behind historical norms.
“A central bank departing from its policy too early, without inflation falling below 2 percent, could certainly create inflationary pressure again,” he said, indicating its possible impact on other countries.
“Looking at inflation levels in Türkiye, Europe, and around the world, including the Middle East, we see that they are still significantly higher than historical levels,” Tufan explained.
Even if the United States reaches an inflation rate of 2 percent, the purchasing power of the public, household inflation, and the overall purchasing power of money would not return to previous levels, he added.
If the Fed made this decision due to recession concerns and is concealing it, the potential for the United States, one of the world’s largest economies, to enter a recession could disrupt global trade flows and trigger recessions in other countries, he warned.
“On the other hand, if such a move is made not for any of these reasons but simply because politicians wanted it, then other central banks that rely on the world’s reserve currency will also be led astray by the Fed’s decisions during this period,” he said.
Tufan said many countries, including Bahrain, Qatar, the United Arab Emirates, and Saudi Arabia, lowered their rates by 50 to 25 basis points following the Fed’s decision based on their trust in the U.S. central bank.
“This is particularly concerning because their inflation rates are still very high or not at the desired levels, and merely following the Fed’s lead could potentially lead to significant mistakes for those countries,” he said. ■