Welcome to Money for the rest of us. This is a personal finance show on money, how it works, how to invest it, and how to live without worrying about it.

I'm your host, David Stein. Today is episode 495. It's titled The Federal Reserve Cut

rates. What happens now? Last week the Federal Reserve Open Market

Committee reduced its policy rate by a half a percentage point. The new range is 4.75% to 5%.

Now it was all but certain that the Fed would lower its policy rate, but what was a toss-up was whether the cut

would be a bold half a percent or a more modest quarter of a percent. The challenge with a half percentage point reduction

is it could signal that the Federal Reserve felt it was behind in reducing its

policy rate, that the economy was slowing more

significantly than what the Fed was comfortable with. I shared in our

Insider's Guide newsletter last week the day of the cut that in the past 25 years,

when the Federal Reserve began reducing its policy rate as part of a monetary easing cycle, when it reduced it by

half a percent, the U.S. economy always entered into a recession.

Now there were three times times 2001, 2007, and 2020.

Conversely though, when the Federal Reserve started off and continued with quarter

percentage points cuts each and every time. The three times that occurred

1995, 1998, and 2019 the US avoided a recession. The one exception was 1990.

The Federal Reserve started with a quarter percentage point cut and then followed with three half of percentage points cuts when the U.S. economy entered into a recession.

The Fed started with a half a percent.

Powell said as inflation has declined and the labor market has cooled,

the upside risk to inflation have diminished and the downside risk to employment have increased.

We now see the risk to achieving our employment and inflation goals as roughly in balance, and we are attentive to the risk to both sides of our dual mandate.

The Federal Reserve has a dual mandate, full employment while keeping inflation under

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