What it Means for You

After much anticipation and speculation, the Federal Reserve made a significant decision on Wednesday, September 18 to cut interest rates by half a percentage point. This is a move not seen outside of emergency circumstances since the global financial crisis in 2008.[i] While the Fed typically adjusts rates by smaller, quarter-point increments, this larger-than-usual cut reflects the central bank’s view that inflation is cooling and its long-term goals of employment and price stability are now better balanced.

For many, this change in monetary policy will have far-reaching implications, especially for borrowers and investors.[ii] The cut is expected to lower borrowing costs for mortgages, auto loans, and credit cards, offering potential relief to consumers. However, savers may notice reduced returns on savings accounts and certificates of deposit (CDs).

Additionally, the decision also has implications for stock market valuations. Lower interest rates generally enhance stock values by reducing borrowing costs for companies and making stocks more attractive relative to lower-yielding savings products.[iii]

After the Federal Reserve’s announcement, the stock market initially reacted positively but later pulled back. The Dow Jones Industrial Average was up by 375 points right after the Fed’s decision but ended the day down Even though the Dow and S&P 500 briefly reached record highs, they ultimately couldn’t hold onto those gains and finished lower.

Empowering All to Flourish

At Larson, our mission is to empower you to flourish through all stages of your financial journey. This rate cut underscores the importance of having trusted financial guidance in times of economic change. Our team of expert advisors is here to help you understand how this move impacts your investments and financial plans. Whether you’re considering changes to your portfolio or simply have questions about how to best navigate this new environment, we’re here to provide tailored, strategic advice.

The Federal Reserve’s decision may also signal the beginning of a new cycle of easing monetary policy, with additional cuts possibly on the horizon. As always, we remain committed to being your go-to resource for all your financial needs, ensuring that your portfolio stays aligned with your goals during times of economic transition.

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[i] https://www.cnbc.com/2024/09/18/fed-cuts-rates-september-2024-.html

[ii] https://www.cbsnews.com/news/fed-cut-rates-money-impacts/

[iii] https://www.bbc.com/news/articles/cvgl474nrygo