Stocks Rise as Fed Suggests Rate Cut

Earlier today, the Chairman of the Federal Reserve, Jerome Powell, suggested a rate cut during his testimony before Congress.  His reasoning?  Global economy and trade tensions between the US and China.  Although the current economy in the US remain steady, Powell believes the concerning global economy will weaken ours.  Since his testimony, stocks jumped quickly, and the S&P 500 rose over 3,000 for the first time.  The Dow rose 126.23 points and the Nasdaq increased by 63.52 points. 

Analysts seemed concerned that the Fed wasn’t taking the US economy into account, noting a strong job report this year.  Just last week, job reports show we added over 200,000 new jobs.  This didn’t seem to change the minds of the Reserve.  A weak global economic growth and the high US debt is cause for concern. 

So how does this affect us?  If rates are cut, and after today’s discovery analysts are confident they will, this has numerous affects on the nation.  Interest rates on mortgages and other loans will be more in line with the target rate.  For those with adjustable mortgage rates, they would essentially pay less as their interest rate has decreased.  Other loans include home equity line of credits (HELOCs) and credit cards.

Loans on interest rates are typically the most notable affect.  However, a lower rate also affects savings accounts.  Lower rates mean consumers earn less interest on their savings rate.  If you planned on purchasing a certificate of deposit (CD), the rate of return will be lower than if the rate wasn’t lowered. 

Rates, if lowered, will occur later this month.  The largest unknown is by how much.