The central banks have spoken.

No one expected the United States Federal Reserve to announce a rate change last week – and it didn't. But Fed Chair Jerome Powell's comments and the actions of other central banks led to new records being set in stock markets around the world, reported Randall Forsyth of Barron's.

"…the world's central banks, led by the U.S. Federal Reserve…have all but green-lighted lower policy interest rates in coming months in the expectation that inflation will continue to make downward progress without triggering recessions. The Fed's counterparts at the European Central Bank and the Bank of England similarly signaled lower rates ahead, while the Swiss National Bank made a surprise cut this past week…Meanwhile, major Latin American central banks, led by Brazil and Mexico, are well along in their rate cuts, having been much prompter in raising their rates to fight inflation starting in 2021, a year or more ahead of the Group of 10."

In the United States, a lower federal funds rate could be good news for consumers and businesses. So, how low could rates go?

The Fed's updated Summary of Economic Projections (SEP) shows that Fed officials expect the federal funds rate to move lower over the next three years, and beyond, based on what they know today. Here's the SEP year-by-year forecast:

• 2024: 63-4.87 percent by year end. (Implying three quarter-point rate cuts over the year.)
• 2025: 88-4.12 percent by year end. (Implying three quarter-point rate cuts over the year.)
• 2026: 13-3.37 percent by year end. (Implying three quarter-point rate cuts over the year.)
• Longer term: 38-2.62 percent. (Implying additional rate cuts.)

When the fed funds rate moves lower, lending rates usually fall as well. So, consumers who buy a home or a car, apply for a home equity or business loan, or use a credit card over the next few years, could see lower interest rates.

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Greg Womack

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Edmond, OK 73013

Phone: (405) 340-1717

www.womackadvisers.com