Insights into key market performance and economic trends from Dan Kemp, Morningstar’s global chief research and investment officer.
Fed Starts the Cutting Cycle
The US entered a new phase of the monetary policy cycle last week as the Federal Reserve cut interest rates for the first time since the onset of the covid-19 pandemic. While this cut reduces the drag of higher borrowing costs on economic growth, interest rates remain above the “neutral” rate of 2%-3% that neither stimulates nor slows down the economy. Morningstar’s senior US economist Preston Caldwell expects interest rates to reach that level in late 2025. As monetary policy has a delayed impact, we may witness growing concerns about the economy for many months before the effectiveness of this new policy direction can be judged. Most investors are expecting a half-point cut in either November or December with a quarter-point cut at the other meeting, according to CME…
