Key Takeaways
- The Fed cut rates by 0.50% in September 2024, with more cuts anticipated through the year and in 2025.
- Historically, we’ve seen rate cut cycles take a similar path to current expectations. Rates have often fallen quickly once cuts have begun.
- Falling rates have historically benefited intermediate-duration bonds as well as small-value stocks.
In September, the Federal Reserve (Fed) made its first cut to the federal funds rate since March 2020 – a 0.50% reduction. Now, expectations from both the Fed and market participants are for more cuts, and in relatively short order. Recently released Fed estimates project two more 0.25% cuts in the policymakers’ last two meetings of the year. They also estimate the fed funds rate to be about 3.4% by the end of 2025. The current target rate is 4.75-5.00%.