Federal Reserve Cuts Interest Rates Amid Economic Stability
The Federal Reserve has reduced interest rates by a quarter of a percentage point, citing a job market that has generally eased while inflation continues to move towards the central bank’s 2% target. This decision marks a unanimous vote among policymakers.
Economic Activity Remains Solid
According to the Federal Open Market Committee, economic activity has continued to expand at a solid pace. The benchmark overnight interest rate has been lowered to the 4.50%-4.75% range, as widely expected.
Market Reaction
The S&P 500 held a 0.66% gain after the news, while the yield on benchmark U.S. 10-year notes rose to 4.353%. The 2-year note yield also rose to 4.2347%. The dollar index pared a loss to -0.54%, with the euro up 0.48%.
Expert Insights
Thomas Hayes, Chairman of Great Hill Capital, notes that the Federal Reserve has asserted its independence and commitment to following through on market expectations. Ben Vaske, Senior Investment Strategist at Orion Portfolio Solutions, observes that longer-term rates have been on a steep upward trajectory since the first cut and have begun to decline post-announcement.
Ellen Hazen, Chief Market Strategist at F.L.Putnam Investment Management, questions whether the Federal Reserve will start to look to policies rather than data to avoid being behind the curve on inflation. Uto Shinohara, Senior Investment Strategist at Mesiro, believes that the cutting cycle will continue to be data-dependent.
Fed Chair Powell’s Next Move
Matthias Scheiber, Global Head of Portfolio Management at Allspring Global Investments Systematic Edge Team, expects Fed Chair Powell to communicate a ‘wait-and-see’ approach with another key jobs report and inflation data coming before the next FOMC meeting.
Impact on Consumer Activity
Michele Raneri, Vice President and Head of U.S. Research and Consulting at TransUnion, hopes that continued rate cuts will stimulate consumer activity in the credit market, particularly in mortgage rates and auto refinancing.
Expert Analysis
Michael Rosen, Managing Partner and CIO at Angeles Investments, notes that the Fed’s cautionary note on inflation has caused Treasuries to sell-off. Brian Jacobsen, Chief Economist at Annex Wealth Management, believes that the Fed will have to moderate its easing program as inflation remains above target and the economy hums above trend.
Ryan Detrick, Chief Market Strategist at Carson Group, expects the Fed to cut again in December as inflation continues to improve. Helen Given, Associate Director of Trading at Monex USA, anticipates a cautious decision that doesn’t give much insight into future rate cuts.
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