Fed cuts rate by 50 basis points

[ua_guy]

Discuss!

[disneysteve]

I believe the word on the street was 50/50 if they were going to do 0.25 or 0.50 so it doesn't come unexpected. It does mean the party is over for those of us who have been enjoying the 5+% CDs and Treasuries for a while. Fortunately, I've got things paying 4.9% and above going out as far as 9/2026 but as things mature (mostly every 3 months) the renewals will be at lower rates which is unfortunate. We'll have to see what the stock market thinks. Lower rates are good for business as it lowers borrowing costs. That makes it easier to borrow money to open new businesses and expand existing ones. Hopefully that translates to continued strength in the market. The economy is very strong now and hopefully will stay that way for the foreseeable future.

[kork13]

Nice. Definitely an indicator of assessed strength to go 50bp at once vs. 25bp. I'm a little surprised that the markets are barely reacting at all to the news. Obviously a rate cut was expected & already baked in to prices ... But there was some uncertainty about how big of a cut (25 or 50bp) it would be. And typically, stock markets are buoyed by lower lending rates. But so far, the only reaction looks like a minor burp.

The other market I pay attention to is the Yen exchange rate, given that I live in Japan & a stronger dollar means effectively cheaper stuff here when purchased with Yen. Since July, the Japanese government has done some stuff to make the Yen stronger & the rate fell from ~160¥/$ down to 140¥/$. Today's news has at least bucked that trend a bit, now up to 142... But we'll see how it settles out over the next few days.

[Drake3287]

Have to be honest, I was still hoping for only a quarter percent. I'm one of the few that's adversely affected by this increase. Like other mostly retirees, I have zero debit and scores of cash sitting in 5+% CD's. It was nice while it lasted! I know it's good for the country as a whole though. I have a 5%, $100+k CD renewing next week and you can bet the rate drop with CD's will happen almost overnight. Always slow going up but they quickly go down.

[bjl584]

the Fed is indicating that another 50 basis point cut could be coming before year end.
I was thinking 25 point cut, but they went with a large one.
My savings accounts will take a hit on interest rates, but hopefully the markets can keep rallying. I was surprised they couldn't hold the momentum yesterday.

[Jluke]

Pre-market, this morning stocks seem happy.

[disneysteve]

Have to be honest, I was still hoping for only a quarter percent. I'm one of the few that's adversely affected by this increase. Like other mostly retirees, I have zero debit and scores of cash sitting in 5+% CD's. It was nice while it lasted! I know it's good for the country as a whole though. I have a 5%, $100+k CD renewing next week and you can bet the rate drop with CD's will happen almost overnight. Always slow going up but they quickly go down.

We’ve got a lot (40%) in CDs and treasuries but we have even more (60%) in stocks. If fixed income rates come down but stocks continue their ascent, that’s okay in the big picture.

[bjl584]

Pre-market, this morning stocks seem happy.

up 500 points pre-market

[Fishindude77]

I had two CD's close out today that were at 4.9%.
Renewed one for 13 months at 4.6% and the other for 9 months at 4.1%.

[disneysteve]

I had two CD's close out today that were at 4.9%.
Renewed one for 13 months at 4.6% and the other for 9 months at 4.1%.

We have one maturing on Monday that was at 5.3%. Those days are gone.

It's important to keep in mind, though, that when some of those CDs and Treasuries were purchased, the inflation rate was near 10%. Now it's 2.9%. A 3 to 4% return is still at least keeping pace with inflation if not slightly ahead of it. It's all relative. 5% sounds great, but not when inflation is 9%. I'd rather earn 3.5% when inflation is 2.9%.

[ua_guy]

The reaction yesterday felt very reserved but does appear a little more optimistic this morning. I tend to disagree with the Fed's self-assessment that they didn't wait too long to act. I think the size of the cut speaks for itself.

My last CD at 5.4% in my retirement account liquidated on Monday, and I still need to decide what to do. Last week we did put a chunk of savings into one at 4.6%, glad we did. The announcement should also spur some new activity in the real estate markets. Coincidentally, we had a check-in with our realtor scheduled for yesterday afternoon and the rate cut was the news du jour. It's expected to get a good handful of buyers off the sidelines before the holiday season.

[Fishindude77]

We have one maturing on Monday that was at 5.3%. Those days are gone.

I'm not complaining at 4.1& & 4.6%
They were sub 2% not all that long ago.

[kork13]

The reaction yesterday felt very reserved but does appear a little more optimistic this morning. I tend to disagree with the Fed's self-assessment that they didn't wait too long to act. I think the size of the cut speaks for itself.

My last CD at 5.4% in my retirement account liquidated on Monday, and I still need to decide what to do. Last week we did put a chunk of savings into one at 4.6%, glad we did. The announcement should also spur some new activity in the real estate markets. Coincidentally, we had a check-in with our realtor scheduled for yesterday afternoon and the rate cut was the news du jour. It's expected to get a good handful of buyers off the sidelines before the holiday season.

Agreed, the reaction yesterday seemed strangely muted for how significant of a shift it was. It's like for some reason it took the international markets to start reacting before our own US markets would react more to it. Odd. But today's +1.5% is much more normal for this type of movement from the Fed.

And I hope you're right about the real estate market -- we're finally listing out family's house for sale this Friday, long-delayed by my wife's ongoing PT doctoral program, which she graduates at the end of the month! Finally getting my family out to Japan with me in Nov.

[disneysteve]

Another thing to keep in mind for those of us who buy brokered CDs and Treasuries is that as interest rates fall, the cash-out value of our holdings will increase. That 5% CD in my Vanguard account is now worth more if I sell it before maturity. Same for Treasuries.

[Drake3287]

We’ve got a lot (40%) in CDs and treasuries but we have even more (60%) in stocks. If fixed income rates come down but stocks continue their ascent, that’s okay in the big picture.

It was nice having both!