The US Federal Reserve has cut interest rates for the third time this year, which are now in the range of 1.5% and 1.75%. This did not surprise the markets. With inflation subdued and under control, it is likely that interest rates will remain at these levels for the foreseeable future. The reduction in US interest rates highlights the problem central bankers in the developed world will face if there is an economic shock to the system. Put simply they have little ammunition in their armoury in that they have exhausted nearly all their monetary policy options. What we are likely to see are governments supporting their economies by reverting back to good old fashioned fiscal policy (i.e. public spending). We are already seeing the start of this trend in the US and Europe. The danger is that excessive public spending and debt played a significant role in the 2008 financial crisis and the resulting age of austerity. There may be trouble ahead, but in the meantime, the global economy is continuing to expand, albeit at a slower pace, and, at the time of writing, everything is going in the right direction.