The Fed cuts rates but faces challenges; consumer sentiment drops, inflation high.

From Investing.com: 2025-03-21 09:10:00

The University of Michigan Consumer Sentiment Index for March dropped to 57.9, below estimates, with inflation expectations at a 32-year high of 4.9%. Economic slowdown is attributed to tariffs, reduced labor force, zero growth in public sector spending, and tightening lending standards. The Fed decided to keep rates at 4.25-4.5% but cut GDP forecast to 1.7%. Powell plans to slow balance sheet reduction and aims to return inflation to 2% by 2027. The Fed’s rate-cutting cycle may not prevent recession or market downturn, historically proven to be ineffective at averting significant losses.

Investors should actively manage investments amid economic uncertainties, including potential bubbles in housing, equities, and credit markets, as well as the risk of rising interest rates during the next recession.



Read more at Investing.com: Why the Fed’s Rate Cuts Might Fail Again: Lessons from 2000 and 2008