The rate-cutting era in the U.S. has finally arrived and global markets took notice. The U.S. central bank began its long-anticipated interest rate-cutting cycle September 18th. As expected, markets welcomed the news with enthusiasm and chairman Jerome Powell delivered a rare double: a 0.5% cut, rather than the usual 0.25%.

While the Federal Reserve is meant to operate independently of political influence, the timing—just weeks before the upcoming election could raise some eyebrows. Could this be an economic “boost” to lift the spirits of the U.S. voting masses? Or maybe it’s just a well-timed coincidence. Either way, as investors, we’re not complaining!

While we are on the topic.. let’s recap the rise and fall of interest rates in the past months:

• The US rate hikes began at a blistering pace through 2022-2033 from near 0% to above 5%

• Since that time, the intended outcome has happened. Inflation has had a remarkable reversal due to the resupply of goods and the rising rate.

• Inflation rates peaked above 9% in June 2022 and dropped to a near-target level of 2.5% recently.

• All the while, consumer consumption, corporate profits, labour, and overall economic growth have been very resilient and well ahead of expectations

For central banks, the decision to cut interest rates is a tricky one. Easing too much or too soon could reignite inflation while easing too little or too late could have consequences for economic growth. The economy has shifted away from inflation and towards growth. The market appears to be primed for a so-called “soft landing,” which is a slowdown in economic activity that doesn’t lead to a recession. A “good news” result.