Money For the Rest of Us
The Federal Reserve Cut Interest Rates. What Should We Do Now?
Sep 25, 2024
The recent cut in interest rates by the Federal Reserve raises questions about its impact on investments. The discussion includes the factors influencing interest rates and forecasts for bond market performance. Listeners will learn about new research tools for analyzing bond returns and the importance of understanding bond dynamics in a fluctuating rate environment. There's a focus on historical performance, the challenges of accurate forecasting, and strategic approaches to navigating current investment risks.
28:07
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Quick takeaways
- The Federal Reserve's recent rate cut suggests potential economic concerns, historically indicating possible upcoming recessions if sustained.
- Expectations for future interest rates indicate a possibility of further cuts, emphasizing the importance of reevaluating fixed income investment strategies.
Deep dives
Impact of Federal Reserve Rate Cuts
The recent reduction of the Federal Reserve policy rate by half a percentage point indicates concerns about the economy slowing down more than anticipated. In the past 25 years, such a substantial cut has often preceded a recession, occurring in 2001, 2007, and 2020. Conversely, more modest quarter-point cuts in 1995, 1998, and 2019 saw the economy avoid recession. The current decision by the Fed may reflect a precarious balance between managing inflation and employment risks as the labor market cools.
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