Fed hints at September rate cut

by / ⠀News / August 15, 2024
September Ratecut

The Federal Reserve is expected to cut interest rates in September amid recent economic turbulence and market volatility.

The Dow Jones dropped by over 1,000 points on Monday, its worst session since 2022, following a surprising jobs report and a volatile Japanese market. The Bureau of Labor Statistics reported that only 114,000 jobs were added last month, a substantial decrease from previous months.

The unemployment rate also rose to 4.3% in July, further stoking recession fears. Global markets rebounded, with the Nikkei 225 having its best day since October 2008, jumping 10.2%.

However, the recovery was short-lived; by Wednesday, the Dow again fell by 234 points, and the S&P 500 dropped by 0.8%.

Melissa Cohn, regional vice president at William Raveis Mortgage, stated that the weak jobs report “effectively assured” that an interest rate cut will happen.

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Fed’s September rate cut anticipation

Consumers should expect a small initial cut, but more substantial movement in interest rates could occur if the Fed cuts rates multiple times by year-end.

Mortgage rates may not change based on a Fed cut, but other loans like home equity, student loans, and car loans are expected to drop every time the Fed cuts rates. “People need to remember that mortgage rates are tied to the bond market, which is more affiliated with inflation rates and economic data than it is to the Fed funds rate,” added Cohn. Economists are divided on whether the U.S. is heading toward a recession.

The unemployment rate’s rise to 4.3% triggered the Sahm rule, an economic indicator of a recession. However, Adam Schickling, a senior economist at Vanguard, believes it is doubtful that a recession has started, noting conflicting reports and unique anomalies in the job market data. While fears of a recession may be an overreaction to a bad week and weak employment figures, a continued slowdown in the job market could signal a more significant cause for concern in the near future.

About The Author

Erica Stacey

Erica Stacey is an entrepreneur and business strategist. As a prolific writer, she leverages her expertise in leadership and innovation to empower young professionals. With a proven track record of successful ventures under her belt, Erica's insights provide invaluable guidance to aspiring business leaders seeking to make their mark in today's competitive landscape.

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