This past week the Federal Reserve, aka “The Fed”, held their June meeting and as expected, left rates unchanged.
However, they said some key things which helped both Stocks and Bonds move nicely higher, with rates touching the best levels in 21 months.
The Fed removed the word “patient” in their Monetary Policy Statement to describe their monetary policy approach. This means they will react quickly with a rate cut and not be so “patient” in the future.
They also cited many “uncertainties” that may require a Fed rate cut — slowing global economies, trade and disinflation.
One part of the Fed’s dual mandate is price stability or inflation, and with inflation moderating the Fed wants to do what it can to “allow” inflation to rise — they see cutting rates as a measure.
So now, financial markets are fully expecting a rate cut at the July 31 meeting.
Bottom line: a Fed rate cut is designed to keep the economy from falling into a recession. This coupled with the best rates in nearly two years is a wonderful story as summer officially begins.