09 18 25 Bankrate Financial Analyst Stephen Kates on the Fed rate cut yesterday

Episode Transcript

Speaker 1 (00:00):
Gina Goddeck, Marty Lenz, and our Business and Money editor
Pat Ward here on Colorado's Morning News for the first
time since December. The Federal Reserve cutting its benchmark interest
rate yesterday and signaling more cuts are likely this year.

Speaker 2 (00:12):
Central bankers opted for a quarter point cut this time around,
matching expectations on Wall Street. Stocks initially moved higher on
the news before falling into a red across all three
major indices. Joining us now in the ka Comma Spirit
of Health Hotline Bank Rate Financial Analyst. It's Stephen Kates. Steve,
thanks for coming on with us this morning. So with
all the chatter for rate cut and Wall Street was
kind of like the rate cuts. So what you surprised

(00:34):
by the reaction yesterday, You know.

Speaker 3 (00:38):
Not entirely, you know, I think that the Federal Reserved
does a great job of telegraphing in most cases what
they're going to do. There were high expectations that this
is going to be a quarter point rate cut, so
you know, that was kind of priced in in a
lot of ways to the stock market, to the bond market.
At the press conference, we always see a little bit
of movement, and we saw that this time just because

(01:01):
you know, there's there's different reactions to you know, different
things that share Powell says, but ultimately, you know, the
market end of the day pre flat. You know, I
don't think anything earth shattering really took place over right,
So what.

Speaker 4 (01:12):
Does the rate cut mean for the average consumer? And
how long before we see the effects that might come
to the average consumer.

Speaker 3 (01:21):
You know, this is going to sound very anti climactic,
but you know, everybody waking up this morning is not
going to have anything really different in their life. This
quarter point rate cut, you know, is relatively small, and
so it is going to have any impact, but not
one that most people are probably going to take notice of.
For instance, somebody who may have credit card debt. You know,

(01:42):
the the average rate of credit card interest on a
balance that's carried is you know, somewhere in the neighborhood
about twenty percent. If that drops by a quarter percent,
it's not really going to change a whole lot for
for that person. You know, we look at something like
mortgage rates, which the SETL Reserve does not directly control.
Those actually have been falling since January, and so you know,

(02:06):
this cut is not terribly impactful given how much we've
already seen mortgage rates come down in anticipation of the
FED cut, also in anticipation of just weakening economic news,
and so some of that, you know, sort of moves around,
you know, even with the whispers of what FED might do,
let alone what it actually does. So people are going

(02:26):
to have to sort of decide, absence of this singular event,
how they want to save, borrow, and invest. And they
really shouldn't change their strategy just because you're on Powers
Booke yesterday.

Speaker 1 (02:36):
So Stephen, not terribly impactful for local consumers or the
average American, But is this impactful in ways to the
overall economy? To businesses? Do they look at this and
take action accordingly?

Speaker 3 (02:49):
So the overall economy and you know, and that boils down,
you know, sort of trickles down to the average person
as well, you know, is going to be most impacted
by the direction of where we're going. So this meeting
really signals a change in the trajectory that the SAID
has had. You know, for the last nine months there's
been no cuts. They have been focused squarely on fighting inflation,

(03:11):
and they're now shifting the mindset more towards being accommodating
and supportive of the labor market and the economy as
a whole, given that we've seen some deterioration in terms
of hiring, in terms of unemployment, in terms of job gains.
So that shift is going to hopefully put businesses in
a position where they feel like there's a little bit

(03:34):
more confidence going into twenty twenty six for investing in
the business, for hiring in the business, and that should
be good for the economy. That will benefit the average
person as well as we get out of ideally this
sort of malaise that we've had, you know, in terms
of job growth. With further cuts, if they do come
down the line, we're expecting two more in twenty twenty

(03:55):
five and one more in twenty twenty six based on
the said's projections. Collectively, we'll all start to actually move
foreign rates down more meaningfully, and people may start to
notice that their saving accounts pay a little less, but
that they can borrow on auto loans, home equity loans,
and mortgage loans, you know, at lower rates, and that's

(04:17):
going to be a very welcome thing.

Speaker 4 (04:18):
Well, with the Fed somewhat changing its focus from inflation
to jobs, is this going to stimulate the economy and
does it need to be stimulated, you know.

Speaker 3 (04:30):
So there are areas that are going to need to
see a little bit of stimulation. And I think that
what the FED is trying to do is and not
necessarily pull us out of the abyss here because the
economy is not in terrible shape, but it's worsening. You know,
if we look at the unemployment rate today at four
point three percent, it's actually pretty low on a historical scale,

(04:51):
but it was much lower last year and it's been
worsening relatively steadily since then. And the SAD wants to
sort of arrest that suation. They don't want things to
get worse. They don't want more people to be unemployed
and more people to find it very difficult to find
a job. And so putting a little bit more juice
into the economy or giving businesses a little bit more

(05:15):
expectation that some easing is coming, easier borrowing, you know,
more more incentive to sort of fuel the economy and
increase the growth rate of the economy. You know, that's
going to be a good thing. That should boost the ideal,
you know, ideally the level of hiring that we start
to see, but it may take a couple of months.

Speaker 2 (05:36):
Having said all that, what I'm hearing you say is
they make this move, don't change anything you're doing. It's
not immediate, but it's it's giving a little bit of
of taking away some of the uncertainty for some people
in the economy. And then I'm wondering this too as
we wrap up with you, Steven, and I know everything's
not through the prism of politics, but did the FES
do this as well to essentially get the president and
then the administration off their back as well for doing something?

Speaker 3 (06:00):
You know, there was a moment in the press competition
today that you know, potentially points to that exact situation
where Settle Reserve chairman drum Powell said that this was
a risk management rate cut, and the risk that he's
managing could be viewed a couple of different ways. You
could look at this as he's managing the risk of
the economy. He could also be managing the political risk

(06:21):
that he's making. They're making a cut. Uh. To to
do a little bit of both, uh, you know, to
to try to put a little bit of focus on
the fact that you know, they are supportive of the economy,
but also that they're making an attempt to try to, uh,
you know, go with the float a little bit, you know,
how you look at this or what your perspective may
be and shift depending on sort of what what viewpoint

(06:41):
you have from political lens, you know. But there's certainly
some you know, some case to be made that that
they're trying to do a little bit of both.

Speaker 1 (06:50):
Been great financial analyst. It's Stephen Kates.