What effects will the first rate cut in four years have on markets, workforce?
The Federal Reserve announced a half-percentage-point cut in benchmark rates yesterday, at the higher end of market expectations. The decision marks the central bank's first rate cut since the early days of the COVID-19 pandemic in 2020.
The decision to lower rates to a range of 4.75% to 5% comes amid a recent hiring slowdown, though last month's 4.2% unemployment rate remains relatively low by historical standards. The Fed's decision also followed last week's consumer price index report, which showed inflation slowing to 2.5% year-over-year in August, approaching the Fed's 2% target.
Despite the announcement of a higher-than-expected cut, markets closed lower on yesterday's news (S&P 500 -0.3%, Dow -0.3%, Nasdaq -0.3%). Traders appeared concerned the decision indicated the Federal Reserve sees risk of an elevated economic downturn.
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