As I write this, the Fed has not announced interest rate cuts but the rumor mill assumes we will see a cut in September. Some think a cut of .25bps, some think a “mega” cut of .50bps, is on the table. By the time this article prints, the September 16 or 17 Fed meeting decision will be two weeks past and we will know whether the cuts came through as anticipated.
So, whether they cut, remain the same, or raise rates, why do interest rates matter to us?
Interest rates effect the influence of borrowing money for large financed purchases. Lower interest rates, for example, encourage people to obtain loans for vehicles, homes, home improvement projects, etc. Lower interest rates also tend to foster growth in businesses from expansion plans to hiring more workers. On the surface, lowering interest rates has a positive effect on the overall day-to-day economy.
The stock market typically responds positively to lowering rates as long as the context behind the decision is that the economy is on the right track to absorb growth and expansion. The market can, however, have negative reactions if the context of the lowering is due to economic strain like a slowing job market or inflation.
Things that make the rate cut in September likely:
Slowing economic growth and cooling labor market reports
Why the Fed may continue to wait:
- Some inflation reports show optimism while other inflation concerns remain in the midst of tariff negotiations
- There is still economic data to be reported in the coming days so “they might not know until they know” as reports come in right up until the Fed Meeting on Sept 16-17.
Projections from economists are that there will be a cut in September, another in December, and more scattered throughout 2026 and 2027.
While cheaper is rarely better, in the world of financing money and boosting the economy “cheaper money” from lower loan terms would be a positive impact on your everyday person.
As active fiduciary advisors, times like this keep us on our toes. We will be watching closely to see what decisions are made and what new or ongoing asset classes are to gain from said decisions. No matter who is President or what is going on in the world, there are things to be done to put our clients in the position to win over the long term.
We appreciate, more than ever, our ability to be autonomous and nimble on behalf of our clients so we can represent their ambitions in concert with the moving parts of the world. Sometimes it is easy, sometimes I notice new grey hairs in the mirror… but we love to help people win so we never back down from the challenges. Let us help you bring confidence to the commotion
Financial Advisor
Prime Capital Financial
Cedar Rapids, Iowa
primefinancialcedarrapids.com
(319) 269-7143
Advisory products and services offered by Investment Adviser Representatives through Prime Capital Investment Advisors, LLC (“PCIA”), a federally registered investment adviser. PCIA: 6201 College Blvd., Suite#150, Overland Park, KS 66211. PCIA doing business as Prime Capital Financial | Wealth | Retirement | Wellness.
Ashlea Jones