Wed Sep 18 17:12:56 UTC 2024: ## Fed Expected to Cut Interest Rates for First Time Since 2020

**New York, NY** – The Federal Reserve is expected to lower interest rates on Wednesday, marking the first rate cut since 2020. The central bank’s current target rate range sits at 5.25% to 5.50%.

The market is divided on the extent of the cut, with some expecting a 50 basis point reduction while others anticipate a more modest 25 basis point decrease. Fed funds futures data suggests a 55% likelihood of a 50 basis point cut and a 45% chance of a 25 basis point cut.

This decision follows over two years of tight monetary policy, which has significantly impacted borrowers. Mortgage rates have risen to 6.12% for the 30-year fixed rate, up from 4.29% in March 2022. Home equity loan rates have similarly climbed to 8.49% from 5.96% during the same period. Credit card interest rates have also jumped more than 400 basis points since the Fed began raising rates, reaching 20.78% as of last week.

While borrowers have faced the brunt of the rising rates, savers have benefitted. Five-year certificate of deposit yields have increased to 2.87% from 0.5% in March 2022, and money market fund yields have risen to 0.46% from 0.08% during the same period.

Investors are eagerly awaiting the Fed’s rate decision, as it will provide insights into the central bank’s view on the economy. In addition to the rate decision, the Fed will release its Summary of Economic Projections, which includes forecasts for GDP and inflation.

Aditya Bhave, senior U.S. economist at Bank of America, cautions investors to be wary of a 50 basis point cut, stating that it might signal a lack of confidence from the Fed in achieving a soft landing. He anticipates a 25 basis point cut, and suggests that a larger reduction could lead to a short-term rally in risk assets followed by a potential downturn.

The Fed’s rate decision will be announced at 2 p.m. ET on Wednesday, followed by a press conference by Chair Jerome Powell at 2:30 p.m. ET. The market will be closely watching the Fed’s announcement to gauge its outlook on the economy and the future of interest rates.

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