For the second time this year, the U.S. Federal Reserve (the Fed) lowered the target range for the federal funds rate. The range was decreased by 25 basis points (bps) to 4.50–4.75%. For more details, visit Board of Governors of the Federal Reserve System Opens a new window..
In the Federal Open Market Committee (FOMC) statement, the Committee acknowledged that labour market conditions have generally eased, and that the unemployment rate has moved up but remains low. Inflation has made progress toward the Fed’s 2% objective but remains somewhat elevated. The FOMC also noted the balanced risks to achieving its employment and inflation goals support its decision to reduce the target range.
Leslie Alba, Director, Portfolio Solutions, Total Investment Solutions at CIBC Asset Management, says, “With market participants expecting the 25 bps cut, it’s not surprising that markets were unemotional following the announcement. In contrast to the U.S. presidential election earlier this week, the result of the Fed’s meeting seemed relatively more predictable.”
“While we expect continued market volatility in light of political and economic news, when the dust settles, we believe asset prices will return to being primarily driven by the financial productivity of those assets. Our advice to investors is to remain invested and to stay focused on their long-term financial goals. Historical data shows that timing markets around events like these is not a reliable investment strategy.”
“Holding a diversified portfolio of stocks and bonds is the best way to prioritize your investment goals, while also ensuring your portfolio has exposure to any changes in leadership in the financial productivity of asset markets as these occur.”
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