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Welcome to Investing Insights. I'm your host, Ivana Hampton. The Federal Reserve has pivoted from their inflation fight with a big move.

It has slashed interest rates by a half a percentage

point at the September meeting. The aggressive cut marks the first one since March 2020 as part

of the pandemic response. But this time, balancing the risk of softening inflation and job market

are motivating the Fed. What does this mean for Wall Street and Main Street?

I sat now with Preston Caldwell to discuss that.

He's the senior U.S. economist for Morningstar Research Services.

Thanks for joining me, Preston.

Hey, Ivana.

Thanks for having me.

So market watchers were divided over how much the Fed would cut.

It wasn't even a unanimous decision among the Fed governors with one dissenting vote.

What was your reaction?

Yeah, yeah. So, I mean, you know, and beyond the one dissenting vote, I'm sure there was lots of debate and contention ahead of this decision.

Now, ultimately, I mean, they went with the larger cut of 50 basis points. We were surprised by this. I thought they would go with 25 basis points just given

their usual kind of cautious and gradual mode of decision making. But I think what tipped it for

them is is two things. First, in terms of the data, we've seen much weaker data in terms of the labor

market, mainly in terms of the unemployment rate taking up, going up by over half a percentage

point in the last 12 months, taking a three-month moving average. So, you know, historically,

that's been a strong indicator that a recession will occur.

So I think the Fed is watching that closely. And in the inflation data has continued to be

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