When the Federal Reserve cuts interest rates, making it cheaper to borrow, it’s supposed to deliver a direct boost to the economy. But one key part of that machinery has broken down.
Business investment used to rise when U.S. companies took on more debt—because most companies borrowed to add capacity. Nowadays, they’re likelier to funnel the money to shareholders.
Investment is stuck at low levels by historical standards. President Donald Trump’s reduction in corporate taxes hasn’t changed the pattern. Neither has a decade of low interest rates, even before the Fed’s quarter-point cut on July 31.Bloomberg