Beyond the Headlines: How Fed News Influences an Economic Ripple Effect
In the September 2024 Market Pulse webinar, our panelists had a lively discussion about several end-of-year topics, including how student loans are affecting consumer behavior and the latest news from the Fed.
AC Cutts & Associates President and Chief Economist Amy Crews Cutts covered a dynamic macroeconomic update around the latest Fed rate cut — and what it signals.
Later, she was joined by Equifax Risk Advisors, Jesse Hardin, David Sojka, Maria Urtubey, and Tom O’Neill, for a discussion in response to your questions about even more year-end topics.
Separately, we broke down consumer credit trends.
Macroeconomic Observations and Updates with Amy Crews Cutts, President and Chief Economist, AC Cutts & Associates¹
One of the most anticipated financial events of the quarter was the Fed’s announcement about rate cuts in response to inflation. As that result was finally reported, we have the reactions, implications, and possible outcomes.
The Fed’s Rate Cut
With inflation “moving sustainably toward 2 percent,” the Federal Open Market Committee (FOMC) decided to “lower the target range for the federal funds rate by ½ percentage point to 4-¾ to 5 percent.”¹ At first, the stock market responded positively to the announcement; however, that reaction quickly turned into a new realization: This means the Fed is more concerned with recession than inflation.²
For some background, inflation is measured using a basket of goods, including estimates like "owner equivalent rent" for homeowners, which can create some discrepancies in shelter measurements. Therefore, the shelter component of inflation is currently elevated due to lagging data. However, the Federal Reserve believes that excluding energy, food, and shelter, inflation is nearing the target of 2 percent. At this level, inflation tends to go unnoticed by the public as it reflects normal fluctuations in the economy.
When it comes to employment, the unemployment rate has risen slightly to just over 4 percent in a gradual manner, with overall employment growth slowing. This situation led the Fed to decide to cut interest rates, with the size of the cut being somewhat surprising.
Rate Cut Implications
While some might feel light relief from this cut, many will feel nothing at all.² For example, those looking to buy a home or refinance might experience some breathing room, but daily life should not be impacted. Further, one participant asked if there could be more rate cuts this year. Cutts described this as a situation where we should “stay tuned.”
Other Important Areas to Watch²
While the economy settles post-rate cut, there are two other areas of possible concern:
A looming government shutdown
A recent port strike
With a deadline of December 20, 2024, Congress must reach a budget deal to prevent a federal government shutdown on December 21, 2024. Moreover, a shutdown is not ideal in an election year, so there could be a flurry of last-minute negotiations. Regarding the ports, a strike could mean billions of lost dollars and logistical ramifications that would carry a significant impact on the economy and overall supply chain.
Cutts also took a deep dive into the intricacies behind changes in the yield curve and employment numbers as they relate to this cut. You can see those charts by viewing the presentation.
Discussion on the Big Picture: Analysis on Fed News and Consumer Spending³
Our panel of experts not only discussed top-of-mind issues as we head into Q4 2024, but they also took audience questions in real time. Below is a summary of this session, but you can read the full question and answer blog.
Recent drops in rates on CDs indicate potential relief for consumers, particularly in revolving credit products, while fintech companies may see improved funding and increased loan originations following the recent 50 basis point rate cuts. Moreover, there’s complexity within the market due to the Fed rate cut. Specifically, lenders are having difficulty with pricing, while consumers carefully consider when to take out a loan. In our K-shaped economy, there is no clear distinction between those who are thriving and those who are struggling.
The discussion also covered questions about student loan repayment, consumer spending, unsecured consumer lending performance over the next six months, how inflation will affect employee wages, and what keeps our economists up at night.
In summary, information is changing quickly. The best thing to do is stay informed because more knowledge allows for quicker, better action.
Stay in the Know
To receive the full experience and detail from the Market Pulse webinar, you have to be there. We hope you will join us for our October Market Pulse webinar taking place on Thursday, October 17, 2024 when we will continue our discussion of year-end trends.
You can find our monthly Small Business Insights, National Consumer Credit Trends reports, the Market Pulse podcast, and more at our Market Pulse hub.
Questions? Reach out to riskadvisors@equifax.com.
Finally, connect with us on YouTube and LinkedIn for even more content to help you focus on forward.
Sources:
Amy Crews Cutts, AC Cutts & Associates, Equifax Market Pulse webinar, September 19, 2024
Equifax Market Pulse webinar, September 19, 2024
*The opinions, estimates, and forecasts presented herein are for general information use only. This material is based upon information that we consider to be reliable, but we do not represent that it is accurate or complete. No person should consider distribution of this material as making any representation or warranty with respect to such material and should not rely upon it as such. Equifax does not assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice. The opinions, estimates, forecasts, and other views published herein represent the views of the presenters as of the date indicated and do not necessarily represent the views of Equifax or its management.