From Morningstar: 2024-09-19 05:09:00

The Federal Reserve has shifted to easing monetary policy after two years of high interest rates. The Fed reduced the federal-funds rate to 4.75%-5.00% in September, with a larger cut of 50 basis points. This move aims to balance concerns about inflation and economic growth.

Market expectations for the federal-funds rate have driven bond yields lower in response to rate cut expectations. The Fed’s decision to cut rates by 50 basis points did not cause significant movement in bond yields as the Fed aims to align with current market expectations. Despite mild inflation, concerns about the labor market support the need for rate cuts.

Federal Reserve Chairman Jerome Powell stated that the risk of achieving employment and inflation goals are now in balance, shifting focus away from the previous concern of high inflation. The Fed’s monetary policy aims to keep the economy out of a recession with a federal-funds rate closer to its estimated “neutral” rate of 2%-3%, indicating a more gradual pace of rate cuts in future meetings.

Ongoing concerns about inflation and economic growth have led the Fed to implement a series of rate cuts, aligning closely with current market expectations. The aim is to prevent a recession while maintaining a healthy level of economic growth. Powell’s assessment indicates a balanced approach to monetary policy to support stability and growth.



Read more at Morningstar: Fed Rate Cut Shows the Main Battle Against…