US Interest Rates - the first cut is the deepest

19th September 2024

The Fed cut interest rates to 4.75-5.00%.

The cut is the first in four years after holding rates at a 20 year high for a year.

Two year treasuries fall by 10bps following the decision.

Policymakers boost their expectations for unemployment to 4.4% at year end.

Isaac Stell, Investment Manager at Wealth Club said, "The Federal Reserve has entered the race at pace, opting for the jumbo option, cutting headline interest rates by 0.50%. This was the first cut to interest rates in 4 years.

Despite there being no significant economic woes on the radar, policy makers have decided to get ahead of the curve as recent payroll reports have shown a gradual slowdown in the jobs market.

This cutting cycle is likely to be a marathon and not a sprint however with a total of 100bps of cuts priced in for the year, likely two further cuts of 25bps, and 100bps more next year. The market was calling for it, and the Fed has delivered. Many may be left wondering what the Fed sees on the horizon to prompt such a bold move."