In an 8-2 vote today, the Federal Open Market Committee (FOMC) decided to cut the federal funds target rate by 0.25% to a range of 1.50% – 1.75%. This cut was heavily predicted by economists and financial institutions, and therefore did not move equity prices immediately following the announcement. The two dissenting votes were in favor of not making any cuts and maintaining the status quo.
Chairman Powell softened the language on the likelihood of future cuts, removing the phrase from the previous announcement that the Fed “will act as appropriate to sustain the economic expansion” and replacing it with less forceful language suggesting a wait-and-see approach. It seems for now, the Fed may be finished cutting rates in 2019. “The Fed is done cutting rates for now and at least so far, investors are okay with it,” says Michael Arone, chief investment strategist at State Street Global Advisors. In a statement accompanying the decision, the FOMC said that the U.S. “labor market remains strong and that economic activity has been rising at a moderate rate.”
Rates remain very low and the indications from the FOMC suggest that U.S. economy is strong despite global economic uncertainty. Today’s rate cut was an attempt to continue our long-lasting economic success, rather than a warning of potential recession or unfavorable economic conditions. Stable, favorable rates means homebuyers can qualify more easily with more purchasing power, or refinance their mortgages into a lower payment. Please contact me if you are interesting in discussing your unique situation.