Interest Rate Cuts in 2 Days: Easy Money Returns (Along with Inflation)!

Summary

The video discusses the Federal Reserve's upcoming interest rate cut, with a 0.25% or 0.5% cut expected on September 18th. The presenter covers potential impacts on the stock market, mortgage rates, and savings accounts. While a rate cut could cause short-term market fluctuations, historically, markets trend upward in the long run. The presenter advises caution with CDs and warns that an easier monetary policy may devalue the dollar against commodities, and potentially lead to re-accelerated inflation by 2026. The labor market is predicted to remain challenging for the year.

Takeaways

• 📅 The Federal Reserve is expected to cut interest rates on September 18th.
• ❓ The decision is between a 0.25% or 0.5% rate cut, with a 0.5% cut currently favored by the market.
• 📊 Market expectations as of Monday show a 39% chance for a 0.25% cut and a 61% chance for a 0.5% cut.
• 🔮 The Federal Reserve will also provide economic projections, giving insights into future rate decisions.
• 📉 Historically, stock markets have varied in the short term after rate cuts but tend to rise in the long term.
• 🏠 The housing market is anticipated to be affected, with mortgage rates expected to drop further.
• 💵 Interest rates on savings accounts and CDs are likely to decrease as the Federal Reserve lowers rates.
• 🏦 There are currently banks offering 4% to 5% interest rates, but these rates are expected to decrease by 2025.
• 🔒 It's suggested not to lock in a CD for a long term at rates below 4%, with a preference for shorter terms.
• 💵 The devaluation of the US dollar is a complex issue and depends on comparison with other fiat currencies or commodities.
• 🚨 The speaker predicts a worsening labor market and a return of inflation due to the easy monetary policy, with 2026 expected to be worse than 2024.

Q & A

What is the expected action by the Federal Reserve on September 18th?

The Federal Reserve is expected to cut interest rates on September 18th.

What are the two possible interest rate cuts being considered by the Federal Reserve?

The two possible interest rate cuts being considered are 0.25% and 0.5%.

As of Monday, what are the market expectations for the interest rate cut by the Federal Reserve?

As of Monday, there is a 39% chance of a 0.25% cut and a 61% chance of a 0.5% cut in interest rates.

What will the Federal Reserve provide on Wednesday that can give insight into future actions?

The Federal Reserve will provide their projections on Wednesday, which will give insight into their actions in November, December, and 2025.

How does the Federal Reserve's interest rate cut historically affect the stock market in the short run?

Historically, the stock market can go either way in the short run (3 to 9 months) after the Federal Reserve starts cutting interest rates.

What is the long-term effect of the Federal Reserve's interest rate cut on the stock market?

In the long run, the stock market tends to go up after the Federal Reserve starts cutting interest rates.

How will the interest rate cut by the Federal Reserve impact the housing market?

The interest rate cut will likely cause mortgage interest rates to drop further and apply inflationary pressure to home prices.

What is the expected change in interest rates for savings accounts and CDs due to the Federal Reserve's action?

Interest rates on savings accounts and CDs are expected to go down following the Federal Reserve's interest rate cut.

What is the recommended strategy for locking in a CD rate given the expected interest rate cut?

It is recommended not to lock in a rate below 4% and to consider terms of 3 to 9 months, aiming for 4.5% or above.

How does the devaluation of the US dollar compare to other fiat currencies in the context of the Federal Reserve's interest rate cut?

The devaluation of the US dollar may not be significant compared to other fiat currencies as they are also moving towards easier monetary policies.

What are the two predictions made regarding the labor market and inflation following the Federal Reserve's interest rate cut?

The labor market is predicted to remain bad for the rest of the year, and the easy monetary policy is expected to re-accelerate inflation, potentially worsening the situation by 2026.