Cuts Underpinned by Market Sentiment

The efficacy of rate cuts is influenced by market perceptions and the sentiment of less financially sensitive firms and households. Despite strong market assumptions regarding future cuts, the actual impact on the economy may vary. Rate cuts can shift business decisions and are closely monitored through surveys, reflecting a desire for supportive monetary policy. The recovery of rate-sensitive spending is critical for assessing the overall effectiveness of the Fed's actions. If spending related to housing and other sensitive sectors does not rebound, concerns about the efficacy of both upward and downward monetary policy will arise, necessitating vigilance in understanding the broader implications for economic activity.