Summary
The Federal Reserve concluded its Open Market Committee meeting and, as expected, lowered the federal funds rate by another 25 basis points. The target federal funds rate is now 4.25% to 4.50%. This was the third reduction in the rate cut cycle, which began in September after the central bank aggressively raised rates throughout 2022 and 2023. Three meetings, three cuts. But based on forecasts released alongside the rate decision, it appears the Federal Reserve will refrain from lowering rates in the coming months at an aggressive pace. While the Federal Reserve has clearly shifted its emphasis from simply fighting inflation, it is still not able to fully focus on stimulating the economy. CPI inflation has fallen from readings above 9.0% to readings below 3.0%, but has recently failed to continue the downward trend towards the central bank’s target of 2%. Meanwhile, the unemployment rate remains historically low and GDP growth has averaged close to 3.0% for several quarters. The economy does not urgently need lower rates. Still. The market’s reaction to the Federal Reserve’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 happen.