Just in time for election season, we are likely to see the first interest rate cut in more than four years. The Federal Reserve meets this week, and at the conclusion Wednesday will announce the news Wall Street has been waiting for. "It is widely expected they're going to lower the key lending rate--100 percent odds, according to the market," says KTRH Money Man Pat Shinn with Heritage Asset Advisors. "What we don't know is are they going to lower it by one-quarter percent, or will it be a rate cut of one-half percent."
The Fed has held rates at historically high levels for the past year, after raising them to fight the inflation that exploded in 2021 and 2022. Now, with inflation cooling but still remaining above the Fed's target rate of 2%, the Fed is still in cautious territory. "They're walking the tightrope," says Shinn. "That's why this is a close call...inflation is still above the Fed's target...if they wait too long (to cut rates) it could throw us into a recession, but if they go too fast it could spur more inflation, which would keep prices higher for longer."
As for what to expect in the months ahead, Shinn says anything is possible, but history may be a guide. "The Federal Reserve has gone through seven rate-hike cycles before now, and in six of those seven they've thrown us into recession," he tells KTRH. "Is this going to be the second soft landing in 50 years? Only time will tell."
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