The Fed is finally pivoting… Here’s what you should know

Yesterday was a big day, folks. The Federal Reserve concluded its September Federal Open Market Committee (FOMC) meeting by announcing the long-awaited decision on key interest rates.

If you haven’t seen the news yet, I won’t keep you in suspense. The Fed cut rates by 0.5% and it was the first rate cut we’ve had since March 2022.

Now, ahead of this meeting, pressure has mounted for a rate cut. The reality is that inflation is cooling (which I covered in last Thursday’s 360 Square), and will soon fall within the Fed’s 2% annual target.

Companies aren’t as worried about inflation as they once were, either. FactSet recently noted that fewer than 50 percent of S&P 500 companies cited inflation during second-quarter earnings calls.

Source: FactSet

Combining this with the recent weakness in the labor market and falling Treasury yields, it was clear that a rate cut was in the cake for September.

In fact, while the market had assumed for months that a 0.25% rate cut was in order, there was a growing consensus that the Fed should cut rates by 0.5%. Before yesterday’s announcement, CME’s FedWatch tool showed a nearly 60% probability of a 0.5% rate cut, with the probability of a 0.25% rate cut at 41%.

But to be honest with you, what I was really interested in hearing yesterday came from the committee’s “dot plot” and Fed Chairman Jerome Powell’s press conference.

The dot chart is a chart that is updated quarterly and shows where Fed officials think key interest rates will be for the rest of the year. And Powell’s comments will provide a glimpse into how the Fed feels going forward.

So, in today’s 360 Squarelet’s take a closer look at the FOMC statement, the latest dot chart and Powell’s comments. I’ll also share what this means for the future and how you can benefit.