Sun Sep 15 11:00:00 UTC 2024: ## Fed Expected to Cut Rates, But Magnitude Remains Uncertain

**New York, September 17th, 2023** – The Federal Reserve is widely expected to cut interest rates on Wednesday, September 18th, in an effort to combat potential economic slowdown. While a rate cut is considered almost certain, the size of the reduction remains a point of contention.

Futures markets currently suggest a quarter-point (0.25%) cut, with a 50% chance of a half-point (0.50%) cut.

The decision comes as the U.S. economy displays mixed signals. While the Atlanta Fed estimates third-quarter GDP growth at 2.5%, the job market has softened, with the unemployment rate rising slightly. The Sahm Rule, a recession forecasting tool, suggests a possible recession, although some argue it may be overstating the risk this cycle.

Further complicating the picture, recent inflation data shows a mixed bag. Consumer inflation has fallen to 2.5% year-over-year, but core inflation, excluding food and energy, remains firm at 3.2%.

The Fed’s current monetary policy, despite no rate changes since July, is considered very restrictive due to falling inflation. This restrictive stance has contributed to a real (after-inflation) Federal Funds rate similar to levels seen before rate cuts in the Fed’s last successful economic soft landing in 1995.

Despite the uncertainty, Glenview Trust, an investment firm with holdings in tech giants like Microsoft, Meta, Amazon, Apple, NVIDIA, and Alphabet, believes the base case scenario is a soft landing. However, they acknowledge that a recession cannot be ruled out.

Investors will closely scrutinize the Fed’s economic projections and Chair Powell’s comments for insights into the future path of rate cuts. While a half-point cut is a possibility, recent economic data and the potential for persistent inflation pressure suggest a quarter-point cut is more likely.

In light of the current economic environment, investors are advised to diversify their portfolios with a mix of high-quality, less economically sensitive stocks alongside technology and cyclical companies. Bonds, particularly high-quality bonds, may also offer some protection in the event of an economic downturn.

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