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Fed Expected To Slash Interest Rates By Half A Point This Week

Posted September 17, 2024 at 10:00 am
Finimize Newsroom
Finimize

What’s going on here?

Traders are betting that the Federal Reserve will kick off a series of interest rate cuts with a significant half-percentage-point reduction on Wednesday.

What does this mean?

The Fed’s two-day policy meeting starts today, and futures linked to the Fed policy rate suggest there’s a two-in-three chance of a half-point cut, with a one-in-three chance of a smaller 25 basis-point cut. Until last week, most expected only a quarter-point cut, but reports from the Wall Street Journal and Financial Times have shifted predictions. Analysts believe these reports, likely guided by the Fed, signal a strong push for a bigger cut. The US retail sales uptick in August and a manufacturing rebound show the economy’s resilience, supporting the case for a bolder move. However, some economists warn that such a significant cut could stir dissent within the Fed.

Why should I care?

For markets: Bracing for impact.

A half-point rate cut could send ripples through financial markets, impacting everything from bond yields to stock valuations. With inflation now at 2.5% – close to the Fed’s 2% target – and unemployment slightly higher at 4.2%, this cut aims to strike a balance. Investors should watch how these adjustments affect various sectors, particularly those sensitive to interest rate changes, like real estate and tech.

The bigger picture: A strategic shift.

The Fed’s move to potentially cut rates by half a point reflects its adaptability in addressing evolving economic conditions. This decision, if confirmed, could signal a more aggressive approach in monetary policy. With additional cuts likely through November and December, this strategy aims to bolster economic growth while navigating the delicate balance of maintaining inflation control.

Originally Posted September 17, 2024 – Fed Expected To Slash Interest Rates By Half A Point This Week

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