Asset Classes

Free investment financial education

Language

Multilingual content from IBKR

Close Navigation
Learn more about IBKR accounts

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

Join The Conversation

If you have a general question, it may already be covered in our FAQs. If you have an account-specific question or concern, please reach out to Client Services.

Leave a Reply

Disclosure: Interactive Brokers

Information posted on IBKR Campus that is provided by third-parties does NOT constitute a recommendation that you should contract for the services of that third party. Third-party participants who contribute to IBKR Campus are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

This material is from Finimize and is being posted with its permission. The views expressed in this material are solely those of the author and/or Finimize and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

IBKR Campus Newsletters

This website uses cookies to collect usage information in order to offer a better browsing experience. By browsing this site or by clicking on the "ACCEPT COOKIES" button you accept our Cookie Policy.