Fed Announces Cut Rates

On Friday morning, chair of the Federal Reserve Jerome Powell made a very important announcement.

During a speech at Jackson Hole, Powell finally called for rate cuts after years of constantly high interest rates to counter inflation. "The time has come for policy to adjust," Powell said in the speech.

Powell's decision was caused in part by July's CPI report indicating cooling inflation and slower price increases across the board, meaning that the Fed's high interest rates have worked, and it is now time to reduce them.

This is a very crucial moment in modern economic history in America. High interest rates have largely prevented American companies from taking out large amounts of loans, hindering their ability to take risks, grow their portfolios, and hire more people.

High interest rates have deterred many companies from growth. Most companies in the S&P 500 experienced lackluster growth in share price and earnings from before the 2021 inflation crisis, thus reducing the rate of job creation and increasing unemployment for the first time since during the COVID-19 Pandemic lockdowns.

Most companies in the market should react strongly today. As of 11:00 AM on Friday, all index funds are up by substantial margins. Perhaps, lower interest rates could improve business growth and thus keep this momentum going for much longer than this week.