- Analyst Brett Eth links the Fed’s anticipated rate cut to 2007.
- Fed Chair Powell hints at a rate reduction amid a cooling U.S. job market and nearing inflation target.
- Global markets respond mixedly to potential rate cuts.
Market analyst Brett Eth has drawn parallels between the Federal Reserve’s anticipated September 18, 2024, rate cut and a similar move in 2007. Brett noted that while Federal Reserve rate cuts often lead to long-term market gains, they can trigger short-term declines.
Fed chair Jerome Powell recently hinted at a rate cut in September, expressing confidence that inflation is approaching the Fed’s 2% target. This comes as the U.S. job market cools down, hinting at a possible economic slowdown. Anticipated inflation data, due on Friday, is predicted to be mild, further strengthening the likelihood of a rate reduction. Moreover, current market expectations align with a 0.25% cut at the upcoming Fed meeting, with some analysts even predicting a more aggressive 0.5% reduction.
Brett explained that in 2007, the Federal Reserve started cutting interest rates when they were at 5.25%. Through seven rate reductions between September 18, 2007, and April 30, 2008, the rate was lowered to 2%.
Similarly, the current rates in 2024 are at 5.25%-5.5%, with initial cuts expected to start on September 18. Projections suggest up to nine rate cuts through September 2025, potentially bringing rates down to 3.25%-3.5%.
The analyst also stressed that although Fed cuts are generally positive in the long run, they often lead to short-term bearish trends. He explained that these cuts do not trigger recessions but are made to alleviate economic stress. Historically, the S&P 500 ($SPX) sees an average decline of around 30% after rate cuts. Plus, the market usually takes about 13 months to hit bottom.
Globally, markets have already started reacting to the potential rate cut. Qatar’s benchmark index rose 1.2% in the Gulf region, fueled by gains in Qatar National Bank. Similarly, Dubai’s index increased by 0.8%, bolstered by Emaar Properties. In contrast, Abu Dhabi’s index dipped slightly, and Saudi Arabia’s market stayed flat. Elsewhere, Egypt and Oman saw small gains driven by local market factors.
Disclaimer: The information presented in this article is for informational and educational purposes only. The article does not constitute financial advice or advice of any kind. Coin Edition is not responsible for any losses incurred as a result of the utilization of content, products, or services mentioned. Readers are advised to exercise caution before taking any action related to the company.
