As far as economic forecasts for the US are concerned, as can be seen in the table below, the Fed revised its estimates for economic growth and unemployment in the US in 2024 to 2% (from 2.1%) and 4, 4% (against forecasts for unemployment of 4% at the end of this year) respectively. Of course, it expects lower inflation at the end of the year, at 2.3% against a forecast of 2.6%. Other forecasts remained broadly unchanged: ![\"This](\"https:\/\/www.liberalglobe.com\/wp-content\/uploads\/2024\/09\/image-178-1024x333.png\")
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Powell (Fed): Guide to monetary easing the US labor market – We are not committed to another rate cut<\/em><\/p>\r\n\r\n\r\n\r\n Although the prospect of interest rate cuts makes investors quick to respond, the arrival of easing has often proved disappointing.<\/p>\r\n\r\n\r\n\r\n Consider how stock prices have responded in previous cycles:<\/p>\r\n\r\n\r\n\r\n Like many things in finance, interest rate cuts have little (in this case positive) effect on stock prices.<\/p>\r\n\r\n\r\n\r\n The coverage comes from lowering borrowing costs, which allows companies to keep more of their profits and encourages customers to spend more on their products.<\/p>\r\n\r\n\r\n\r\n If bond yields also fall, future stock returns become much more attractive.<\/p>\r\n\r\n\r\n\r\n The catalysts of the fall<\/strong><\/p>\r\n\r\n\r\n\r\n So what could be the factors causing the fall this time?<\/p>\r\n\r\n\r\n\r\n One is timeless: that money never gets cheaper individually, but because central bankers fear economic weakness and want to prevent it. Just now, this seems less alarming than usual. It is true that America’s labor market has cooled, which caused a violent fall in the summer.<\/p>\r\n\r\n\r\n\r\n However, unlike what has happened with other tightening cycles, the economy appears to be simply slowing rather than entering a recession. So corporate earnings are safer than usual as the Fed begins to ease \u2013 and so should stock prices.<\/p>\r\n\r\n\r\n\r\n More worrisome are the notorious “long and variable lags,” as Milton Friedman called them, between changes in monetary policy and their effects on firms and consumers. More specifically:<\/p>\r\n\r\n\r\n\r\n Thus, interest rate cuts may boost the economy, and therefore the stock market, less today than they would in the past. For this reason, on Wednesday immediately after the announcement of the surprise reduction in interest rates, the stockmarket indices on Wall Street closed in the red.<\/p>","protected":false},"excerpt":{"rendered":" In a reduction in policy interest rates – for the first time in 4 years – by 50 bp. in the range of 4.75% to 5%, the Federal Reserve (Fed) advanced, in an attempt to stimulate the growth of the US economy, to satisfy investors and to raise the morale of the Democrats, especially the … <\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[19,17,391],"tags":[28,636,27,618],"class_list":["post-2328","post","type-post","status-publish","format-standard","hentry","category-economics","category-financial-markets","category-market-analyses","tag-fed","tag-interest-rate-cuts","tag-interest-rates","tag-stockmarkets"],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\r\n
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