Jerome Powell has cut interest rates by another .25 basis points, aiming to reduce the restrictiveness of the FED. Although this cut was expected, huge market sell-offs ensued, a result of Powell’s “sobering outlook for rates and inflation in 2025”. The higher sustained interest rate will keep mortgage and loan rates at a higher premium compared to pre-pandemic levels. The Dow, Nasdaq and S&P have since dropped sharply at the time of writing.
Powell makes it clear that he will utilise market data extensively in 2025 to determine the speed of monetary easing, which has contradicted investor expectations of consistent rate cuts throughout the coming year. Unlike other outlets, I don’t think this is a hawkish stance. Rather, this news has merely shocked investor expectations: at all time highs due to the new presidency and bullish outlooks from prominent investors.
Share prices of REITs, such Realty Income, have been affected significantly. This is because higher interest rates means it is more expensive to afford mortgages and take out loans. To find out more about REITs, click HERE.
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