The Federal Reserve just announced a ½ of 1% cut in interest rates, lowering the target lending rate from 5.25% to 4.75%. This is good news for both consumers and businesses.
Borrowing money for houses, cars, or business necessities just got cheaper. This decrease will also offer some immediate relief to individuals with credit card balances and small businesses with variable-rate debt. Additionally, we expect more cuts in the next few months to lower the rate even further to 4.25%.
As a small business owner myself, it is now much more realistic to consider some purchases and spending items that will improve our productivity and help us expand.
I’ve been critical of Jerome Powell’s leadership of the Federal Reserve because he supported the Biden/Harris spending spree and allowed advocates of 'modern monetary theory' to push for nearly-unlimited deficit spending. This led to the highest inflation in 40 years.
To Powell’s credit, however, the Fed became very aggressive in order to bring the rate of price increases down, almost all the way to their 2.0% target. The most recent data for the Consumer Price Index came in at 2.5% inflation, meaning Powell could take a victory lap when saying in his recent policy statement that the Fed has “greater confidence that inflation is moving sustainably to 2%,” and that the central bank “judges that the risk to achieving its employment and inflation goals are roughly in balance.”
We are cautiously optimistic that by making up for their initial mistake, the Fed can now monitor an economy that is still growing strong enough to avoid a recession. This should all point to continued growth for great American companies and hopefully higher prices for the stock market.
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