How to Read the Fed’s ‘Dot Plot’ Like a Pro

Published On Sep 18, 2024, 12:30 PM

The article discusses the upcoming Federal Reserve announcement regarding interest rates, which is expected to include a rate cut for the first time in over four years. The current interest rate has been between 5.25% and 5.5% since July 2023. Investors are particularly focused on how much the Fed will reduce the rates—by either 0.25 or 0.50 percentage points—and what economic projections will follow. The article highlights the importance of the Fed's 'dot plot', a graphical representation of rate forecasts by officials, which will indicate future policy directions.

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Stock Forecasts

XLFView XLF chart on TradingView

Negative

The Federal Reserve's expected interest rate cut could lead to increased investment in sectors that benefit from lower borrowing costs, such as real estate and consumer discretionary. Bank stocks might be pressured due to narrower net interest margins.

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Positive

Conversely, sectors such as technology and consumer goods may see a positive response, as the lower rates could spur consumer spending and borrowing.

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