“We’re going to take it meeting by meeting,” Federal Reserve Chair Jerome Powell said on Wednesday. The Federal Open Market Committee meets again in November.
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The Federal Reserve’s decision this week to cut interest rates half a percentage point reverberated up and down the U.S. economy, with economists, business owners and investors wondering—what’s next?
“This decision carries profound implications for the trajectory of monetary policy and the broader financial landscape, igniting a spirited debate among market participants, economists, and policymakers alike,” Forbes contributor Dan Irvine writes.
Irvine, who follows market trends closely, predicted that the robust rate cut “could stimulate investment, spur consumer spending, and reinvigorate economic activity, fostering a more favorable environment for financial markets” at a pivotal time for the U.S. economy.
Other Fed watchers, like Forbes contributor Erik Sherman, have expressed concerns that even though this change in policy was expected, recalibrating now may be difficult as prices and employment are still shaking out.
For all the Fed’s effort to engineer a soft landing, it remains to be seen if the timing and size of the cut—and any future cuts—will be successful.
Forbes’ expert contributors help explain what the Fed’s move means for investors, businesses, job seekers, home buyers and more.
What Does A Rate Cut Mean For The Stock Market?
The stock market didn’t initially respond with its usual enthusiasm for rate cuts, writes Forbes contributor Jim Wang, who posits that, “perhaps the market believes the Fed is a bit behind on cutting rates.”
Investors made their real feelings known on Thursday, when stocks and bonds rallied. The S&P 500, the Dow and the Nasdaq had recorded their biggest daily percentage gains since mid-August, Reuters reported. By the time the markets closed on Friday, they managed to notch a 1% weekly gain, with investors already considering whether the November Fed meeting will bring another half-point cut — or just .25%.
Fed Chair Jerome Powell had indicated in his news conference earlier in the week that after cutting rates for the first time in four years, more may be coming. But he was careful not to box himself in.
“Powell avoided committing to any specific timetable for rate policy actions, opting instead to underscore that the Fed is data-dependent and that Fed policy is ’not on any preset course,’” economist Jason Schenker writes.
Indeed, Powell said he will take it “meeting by meeting,” though most observers believe “it is likely to be the beginning of a trend in additional monetary policy accommodation as the Fed cuts interest rates further in the years ahead,” Schenker adds.
Though unemployment is relatively low by historical standards, Forbes careers contributor Jack Kelly writes that calls for Powell and the Fed to shift from fighting inflation to supporting the job market were mounting.
A cut in interest rates is designed to stimulate spending and lead to a stronger economy and, ultimately, higher employment and a more competitive job market. That can be good for job seekers and those looking to move up or on to better gigs, Kelly writes. But nothing is certain.
“While a rate cut is generally seen as positive for job growth, its effectiveness can depend on broader economic conditions, business confidence, and how companies choose to use the lower-cost capital available to them,” Kelly says.
The Fed’s decision to lower rates is a bet on the longer-term prospects of the economy, but one that can also help small businesses now, writes Rohit Arora, who covers lending and small business growth on Forbes.
“Lower interest rates will lead to reduced interest payments for small business owners,” Arora says, and could free up money for consumers that are “hurting badly with all the credit card delinquency and with auto loan delinquency at record levels,” Arora writes.
Lots of types of businesses are affected. “High interest rates hurt the economy by making it more expensive to borrow for mortgages, auto loans, and credit cards—or in many cases, for growing a business,” Forbes contributor Benjamin Adams writes, adding: “And no sector needs the break more than the cannabis industry.”
The monetary policy shift announced this week represents an opportunity for families and individual investors “to reassess and optimize their financial situations,” contributor Brian Menickella writes. Refinancing debt, rebalancing saving and investment plans, and unlocking home-equity potential are all on the table.
“Federal student loan rates will remain unchanged until at least July 1 of next year,” Forbes personal finance contributor Robert Farrington writes. “Whereas the impact on private student loans will be more immediate.”
“This isn’t great news for those who will or have had loans disbursed after July 1, 2024,” Farrington says. But variable rates on private loans could drop and borrowers interested in refinancing student loans with private companies, “may find more competitive rates now than last year.”
Daryl Fairweather, a Forbes real estate contributor and the chief economist at Redfin, was cautiously optimistic in her predictions earlier this summer, advising home buyers to watch carefully.
“The way down for mortgage rates will likely be bumpy as economic data continues to roll in, and the Fed’s actions will play a significant role in determining the path for mortgage rates,” Fairweather said last month.
“Home buyers may want to try to time the market, but getting the timing exactly right is difficult, if not impossible,” she added.
Cutting the interest rate could ‘trigger’ additional upside in cryptocurrency prices as greater liquidity drives heightened demand for riskier assets, according to Forbes contributor Charles Lloyd Bovaird II.
But Dave Birnbaum, who writes about digital assets on Forbes, is less certain. He says that the size and timing of the Fed’s policy shift signals that it’s in “damage control mode.”
“While monetary easing typically weakens the dollar, strengthening bitcoin, the speed and size of this cut may indicate that the Fed is seeing something more ominous on the horizon—a possibility that could lead to increased volatility across all markets, including cryptocurrencies,” Birnbaum writes.
These indicators suggest that macroeconomic instability, sluggish consumer spending and signs of strain on the U.S. labor market continue to stoke fears of a recession even as Powell and the Fed try to stick the landing.
Follow Forbes Money and Investing contributors for more analysis of the Fed rate cut and other economic indicators affecting your investment decisions.
