Fed cuts interest rates for first time in 4 years – here's what that means for your wallet

Published On Sep 18, 2024, 12:33 PM

The Federal Reserve cut the federal funds rate by half a percentage point amid rising unemployment and decreasing inflation. This cut, anticipated by many economists, aims to strengthen the labor market and promote economic stability. The Fed projected inflation is returning to the target rate faster than expected and indicated possible further cuts this year. The lower rates could stimulate borrowing, particularly in the mortgage sector, where consumers are already seeing lower rates encouraging refinancing and home purchases. However, the housing market still faces challenges such as low inventory, maintaining elevated home prices despite decreased demand.

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Stock Forecasts

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Positive

With the Fed's continued plans to lower rates, we may see increased borrowing across various sectors, particularly in housing and consumer credit, leading to stronger economic conditions overall. This follows the trend of lower mortgage rates and increased refinancing activity, suggesting a rebound in economic activity post-recessionary fears.

XLYView XLY chart on TradingView

Positive

The potential for lower consumer credit rates can lead to increased spending by consumers, which may improve the performance of companies relying on consumer spending. This is especially true for retail and financial services. A lingering higher unemployment could create volatility; however, overall sentiment is likely to improve with the rate cuts.

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