In the wake of the United States Federal Reserve's decision to halt rate hikes for the final decision of this year, Wall Street and many Americans are breathing a sigh of relief. For almost two years, the financial market endured aggressive rate hikes intended to avert a recession. Unfortunately, the possibility that the economy could fully dodge the downturn is uncertain, as Federal Reserve chair Jerome Powell, suggests it is too soon to declare victory.
Nonetheless, it appears we are steering in a promising direction. Wall Street was clearly appeased by the Fed's recent decision. Not only was there a pause in rates, but the prospects of three interest rate cuts in 2024 have led to robust optimism. Consequently, the optimism led the Dow to close at a record high, surpassing its momentum from two years ago.
The Federal Reserve's signal of potentially being done with rate hikes points to the possibility of three cuts next year. However, Powell stresses inflation and high prices remain a concern for Americans and that all options remain on the table. The prospective rate cuts next year are promising news for Americans as lower rates translate into more affordable mortgages, student, car loans and credit card bills. A significant development from Redfin suggests the daily mortgage rate average has dropped below 7%, which is a welcome improvement from the previous range of seven to eight percent.
However, a conspicuous discrepancy exists between these promising economic indicators and the public sentiment towards the economy. A recent poll from November revealed a substantial number of Americans are anxious about the economy. The question remains as to whether these encouraging signs will augment the public's confidence in the economy.
While President Biden would prefer more optimistic numbers, the question is whether this news will turn the tide of public sentiment and fortify his political fortunes. However, society must remain aware that the economic forecast can change dramatically and quickly. As the new year approaches, the Dow climbing and gas prices falling suggest we might be moving in the right direction. However, whether this momentum translates into improved public sentiment remains to be seen.
