[Fed mouthpiece: Low interest rates do not guarantee a soft landing for the United States] Golden Finance reported that Nick Timiraos, a reporter for the Wall Street Journal who is known as the mouthpiece of the Federal Reserve, said that whether the Fed's interest rate cuts can achieve a soft landing for the economy depends not only on how much weakness exists within the U.S. economy, but also on whether lower borrowing costs can stimulate new investment and spending to offset any economic slowdown. Even if interest rates fall, many businesses and households may still be reluctant to borrow because they will face higher interest rates than current fixed-rate loans (which were locked in a few years ago). If these borrowers or businesses are reluctant to obtain new borrowing, interest rate cuts may have little effect on boosting the economy. Nick Timiraos pointed out that the problem lies in the difference between the marginal debt cost (which is currently falling) and the average debt interest rate, which may continue to rise, especially for borrowers who locked in low interest rates before the Fed began to raise interest rates. Because the Fed quickly raised interest rates after more than a decade of unprecedented low borrowing costs, the average debt interest rate in many industries is still lower than the marginal cost of new credit, even if the Fed is cutting interest rates.
