Will U.S. return to easy money era?

Published On Sep 22, 2024, 8:00 AM

The article discusses the recent Federal Reserve decision to cut interest rates for the first time since March 2020, signaling that rates might continue to decline over the next two years. While the current Federal Funds target rate is between 4.75% and 5.00%, projections indicate it could fall below 4%. Despite stock market gains following the cut, Fed Chairman Jerome Powell expressed skepticism about a return to historically low rates, suggesting that the neutral interest rate is likely to be higher than in the past. Inflation concerns remain a potential barrier to easing rates further, as highlighted by dissent from some Fed members.

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Stock Forecasts

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Positive

As the Federal Reserve embarks on an easing cycle and interest rates are projected to decline, sectors such as technology and real estate tend to benefit from lower borrowing costs, potentially driving their stock prices higher.

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Negative

With the continuation of rate cuts, financial companies that benefit from higher rates will likely experience pressure, possibly impacting their stock prices negatively.

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