In our spotlight on Business Report tonight, the US is turning an important corner in the year long fight against inflation.

The Federal Reserve today slashed interest rates by a half a percentage point, which is a more aggressive move than some economists expected.

The decision came at a split vote at the end of a two day policy meeting.

The action marks the Fed's first interest rate cut in four years and charts the course for two additional cuts this year, followed by four more in 2025.

Rates, of course, had previously been held at a 23 year high since last July.

So what does it mean for you and the job market?

I'm joined by Farrokh Langdana, the director of the Rutgers Executive MBA program.

Professor Langdana thanks for coming on the show.

Why did the Fed decide to move so decisively now in this moment?

You know, this is actually a huge moment because it's been a while since we've had such a drastic rate cut.

We've had 11 rate hikes, as you know.

So the Fed's been stepping on the brakes since inflation came back in 2022.

You know, inflation had vanished from our country since 1981.

Then it came back in 2022 and the Fed hit the brakes 11 times.

Then what's happening now is that while the inflation is down, it looks like they have engineered a soft landing.

The labor market was throwing up these red lines and this time the Fed's trying to get ahead of it.

This year, Remember when the Fed was cutting rates?

We were trying to hit the brakes earlier on.

It was behind.

There was there was criticism that they were waiting too long or they shouldn't have done enough or they should have moved earlier.

And I was telling people, you know, you're in the middle of COVID.

You don't raise rates in the middle of COVID, you know.

So the Fed was under some flak earlier on for being late.

So I think now is it.

Just for now, would you say they're playing catch up?

You know, I think now it's it's a point at which the market's already baked in a rate cut.

And the thing is that my crew and I'm an engineer by training my undergraduate degrees in engineering.

Macro is strange because it's got these weird legs, these annoyingly long legs, you know?

So then when you turn on the light or turn off the light and macro, the light can go off now or might go off in a week or in six months or not at all.

So you have these huge lags.

And so the Fed is determined that, okay, let's not go into a hard landing.

A hard landing is when you bring down the economy, you know, you bring down overheated growth, you bring down integration, but then you tap the brakes to make sure it just doesn't go all the way into a hard landing, which is unemployment.

And so they are making sure that they are proactive this time and that the job market recovers.

What's the light switch analogy, Professor?

Makes a lot of sense.

The question, I think, on most consumers minds is, is this going to ease financial pressure on them?

What's it going to mean for the consumer now?

So, you know, anyone with a credit card payment, adjustable rate mortgages, double rate mortgages, they will see an immediate benefit right away.

And keep in mind, consumption.

Household consumption, that's 70% seven zero of our economy.

Okay.

That's the turkey on the Thanksgiving table, given that, that's around the corner.

So that's the big one.

You know, forget government spending, forget exports, forget business spending, consumption.

What you and I spend is 70%.

It's the turkey on the Thanksgiving table and consumption is going to pick up in the short run, There is no doubt, because, look, consumption has three components.

One is after tax income.

One is consumer confidence.

And one, the third one is wealth.

That's housing.

So housing prices, if you own a house, you're feeling relative.

So that's a plus after tax disposable income has actually inched up.

Finally post it just just recently and that consumer confidence the first one that's the big one that's getting a big boost with this 50 basis points cut.

Let me ask you, is there a downside?

Yeah.

Is there a downside, Professor?

And I'm thinking about those high interest savings accounts and money market accounts that people took advantage of in these last couple of years.

Exactly.

So, you know, as interest rates small, it's going to benefit borrowers and hurt savers.

And for the last couple of years, I was telling people sort of once it's savers are going to get something out of this that started is going to fade now as interest rates fall and city rates come down.

But keep in mind, Brianna, the 30 year mortgages, the long term borrowing, those rates have nothing to do with what the Fed did today.

Okay.

The Senate and people don't really understand this.

The Fed can only only only affect short term overnight rates or and rates.

The Fed has pretty much no control over 30 year mortgages.

Professor, I have to stop you there and we'll have to continue this conversation and a lot more to discuss.

Professor, forward.

Going down with the Rutgers Business School.

Thanks so much.

Thank you very much.

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