From Morningstar: 2024-09-16 07:28:00

The US Federal Reserve is expected to cut interest rates this week to address economic concerns. There is debate over whether the cut will be a quarter-point or a more aggressive half-point, as the Fed considers improving inflation and a cooling labor market.

Recent data suggesting a weakening job market is driving speculation of a 50-basis-point rate cut. Some argue the Fed should make a larger cut to prevent further economic damage, despite risks of market volatility and economic downturn.

Investor expectations for the rate cut are mixed, with bond market futures indicating a 55% chance of a quarter-point cut. Analysts suggest that while a smaller cut may be announced this week, larger cuts could still come later in the year depending on economic trends.

Despite uncertainty, long-term investors are advised to focus on the Fed’s easing policy rather than the specific size of the rate cut. The easier policy is expected to boost economic growth, creating investment opportunities for those with longer investment horizons. Expect choppy markets in the short term as investors adjust to the new cycle.



Read more at Morningstar: What if the Fed Cuts Interest Rates by Half a Point?