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The U. S. Federal Reserve is already preparing for the first event in four years with the expected date being September 18, 2024. As of today, the federal funds rate is equal to 5.50%, the highest level since 2001, after several gains that started in 2022 for the inflation fight, which peaked horrendously during the pandemic recovery period.
Anticipated Rate Cut
The market pundits expect either —a 25 bps (basis points) or a 50 bps cut to be made. A 25 basis points cut appears to be well expected while a 50 bps cut may imply deeper economic problems. It is going to be made given existing tendencies towards the strengthening of the position of employers and the reduction of inflation rates to the level of 2%. As of August 2024, it went below 5% which gave rise to speculative expectations of a more dovish action by the Fed.
Economic Implications
The implications of a rate cut are significant:
- For Borrowers: The lower interest increases borrowing costs for items such as mortgages and credit cards which can alleviate pressure on the consumers, and possibly increase spending.
- For Investors: A decrease in rates is also expected to improve the performance of the stock markets since lower interest rates may lead to improvements in corporate returns and expenditures by individuals. It is most applicable for sectors sensitive industries that are relevant, especially the technology and real estate industries.
- Global Impact: It holds a huge impact on the global market in particular to countries which use dollar-related currency value as affected by the decisions of the Fed. Cuts in the interest rate in the U. S. could impact the movement of funds and exchange rates in the global market.
Current Federal Funds Rate
As of September 2024, the federal funds rate is 5.50%. This rate has remained unchanged since it was last set during the Fed's meeting in July 2024. The Fed is expected to announce a rate cut during its upcoming meeting on September 18, 2024, with projections indicating a possible drop to 5.25%.
Historical Trends
The federal funds rate has varied widely over the decades, influenced by inflation, economic growth, and monetary policy decisions. Below is a table summarizing the average yields and key data points from recent years:
| Year | Average Yield | Year Open | Year High | Year Low | Year Close | Annual % Change |
| 2024 | 5.33% | 5.33% | 5.33% | 5.33% | 5.33% | 0.00% |
| 2023 | 5.03% | 4.33% | 5.33% | 4.33% | 5.33% | 23.09% |
| 2022 | 1.68% | 0.08% | 4.33% | 0.08% | 4.33% | 6085.71% |
| 2021 | 0.08% | 0.09% | 0.10% | 0.05% | 0.07% | -22.22% |
| 2020 | 0.36% | 1.55% | 1.60% | 0.04% | 0.09% | -94.19% |
| 2019 | 2.16% | 2.40% | 2.45% | 1.55% | 1.55% | -35.42% |
Long-term Projections
Future trends expect the federal fund's rates to be around 3 which is easily viable as many analysts have predicted. 50 % by the end of 2025 and to 3. 25% in 2026.
The next monetary policy meeting of the Federal Reserve is set to be a very important one that could signal the beginning of a new crusade in the US monetary policy strategy that seeks to propel economic growth while maintaining inflation and employment rates in check. Because this development has the potential of triggering significant shocks in the financial markets, investors and economists are keenly observing it and its likely effects on the markets at home and trunk.
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