After months of speculation about how much the Fed will cut interest rates and if the timing will be right to produce a soft landing and avoid a recession, the country is about to get its answer.
While we waited, the economy has largely been in a state of what some economists have called a 'vibecession' – a disconnect between the actual state of the economy and people's largely negative perception of their financial condition. As the Fed's decision draws near and inflation trends toward target levels of 2%, consumer sentiment and economic reality are starting to converge.
Whether this alignment continues depends on what the Fed decides to do with interest rates this week, but there are several positive indicators about the probability of a soft landing. Notably, many interest rates have already begun to fall in anticipation of cuts. For example, the average 30-year mortgage rate has dropped to 6.2% from a peak of nearly 7.8%. The yield on five-year Treasury notes, which impact auto loan rates, has also come down.
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