Summary

The Fed wrapped up its Open Market Committee meeting and, as expected, lowered the federal funds rate by another 25 basis points. The fed funds target rate is now 4.25%-4.50%. This was the third reduction in the rate-cut cycle, which started in September after the central bank had hiked rates aggressively during 2022 and 2023. Three meetings, three cuts. But based on forecasts released along with the rate decision, it looks like the Fed will refrain from lowering rates in the months ahead at an aggressive rate. While the Fed has clearly shifted its emphasis from solely fighting inflation, it is not yet able to completely focus on stimulating the economy. CPI inflation has fallen from readings above 9.0% to readings below 3.0% — but lately failed to continue the downward trend toward the central bank’s goal of 2%. Meanwhile, the unemployment rate is still historically low and GDP growth has averaged close to 3.0% for several quarters. The economy is not in dire need of lower rates. Yet. The market’s reaction to the Fed’s signals indicates that investors and traders are more concerned that the current level of high rates will push the economy closer to recession. In our opinion, that doesn’t have to happe