The Fed Just Flagged Its First Interest Rate Cut Since December 2024, and It Could Be Bad News for the Stock Market

The Consumer Price Index (CPI) measure of inflation increased by 8% in 2022, which was a 40-year high and significantly above the Federal Reserve's target annual increase of 2%. High inflation can be devastating for the economy because it erodes consumers' spending power, and it squeezes profit margins for businesses.The Fed responded by aggressively hiking the federal funds rate (overnight interest rate), taking it from its pandemic low range of 0% to 0.25% to a two-decade high of 5.25% to 5.5% over an 18-month period, which ended in August 2023. The goal was to slow the economy down, which, in turn, would cool inflation.Thankfully, it worked. The CPI increased at a much slower rate during 2024, which gave the Fed enough confidence to cut interest rates three times between September and December. After keeping policy on hold during 2025 so far, a further rate cut might be on the table at the central bank's next two-day meeting, which will be held on Sept. 16 and 17.Continue readingWeiter zum vollständigen Artikel bei MotleyFool Weiter zum vollständigen Artikel bei MotleyFool