Impact of the Federal Reserve's Interest Rate Cut

The recent quarter-point cut in interest rates by the Federal Reserve brings the federal funds rate to a range of 4.25 to 4.5%, representing the third consecutive cut. While this typically signals support for the economy, the Fed's cautious tone indicated no expectation of rapid further cuts, surprising investors. The market reacted negatively, with the S&P 500 dropping nearly 3% and treasury yields spiking, demonstrating a shift in investor sentiment. The Fed’s updated forecasts suggest persistent inflation, a robust GDP growth expectation of 2.5% for 2024, and a revised unemployment rate down to 4.3%, indicating a potential soft landing despite ongoing inflation risks.