The Federal Reserve is widely anticipated to cut interest rates next week, marking a significant shift in its policy as it prioritizes a healthy job market over controlling inflation. The move comes after recent economic data showed a slight uptick in unemployment and a slowdown in inflation.
Questions, however, remain about the size of the rate cut, what it means for borrowers and how it may impact the 2024 presidential race.Why is the Fed expected to cut interest rates?
In theory, lower interest rates help stimulate economic activity and boost employment; higher interest rates slow economic performance and ease inflation. Some Fed policymakers appear to prefer a gradual approach to rate cuts in light of easing inflation and a resilient, albeit weakened, labor market, Daco said. By contrast, others seem to favor a large initial cut that would help avert a more severe job market slowdown.An interest rate cut would mark a major milestone as the Fed shifts toward a lowering of rates and an easing of costs for borrowers, experts said.
The most recent Democratic presidential candidate who failed to win reelection, Jimmy Carter, lost his bid amid a historic series of rate hikes at the Fed.
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