Special Scoop: Major Policy Announcement

Hey friends - scoops are still on break for the rest of the week, but I wanted to share a quick update about a major shift in economic policy that happened today. We’ll be back with regular scoops on Monday! If you have any additional questions, feel free to reply.

It’s finally getting cheaper to borrow money. The Federal Reserve announced a reduction in baseline interest rates for the first time since 2020. The Fed cut baseline rates by half a percentage point in September after aggressively raising short-term borrowing costs from nearly zero to over 5% within less than eighteen months and holding rates there for the past year in an attempt to slow borrowing and spending and cool the rapid rise in the cost of living. Policymakers voted in near unanimity for the steep reversal in policy, signaling their confidence that the recent trend of slowing price increases means inflation is finally under control. Updated economic projections from the committee also showed that they don’t expect a significant economic slowdown or recession but are increasingly concerned about rising unemployment. The Fed forecasted returning short-term borrowing costs fairly quickly to below 3% within the next two years.

This decision marks a major shift in tone from economic policymakers, from a willingness last year to push the economy into recession in order to control inflation to a confidence that they can avoid surging unemployment while stabilizing the cost of living. For savers, this means savings accounts will start to pay less interest. You won’t see the 5% offers much longer. For borrowers, spending on your credit card, financing large purchases, leasing a car, or getting a mortgage will start getting cheaper. People with existing loans and mortgages will be able to refinance at lower rates. Lower rates will also help businesses borrow more affordably. This economic policy shift should act as a boost to both individuals and companies over time.