Fed Decision: 3 Stocks to Watch After Jerome Powell's Latest Move
News Summary
On September 17, 2025, the Federal Reserve cut its federal funds interest rate by 0.25 percentage points to a target range of 4% to 4.25%, following a peak of 5.5% in 2022, the highest since 2001, to combat inflation. The rate cut was largely anticipated, and the latest "dot plot" suggests the possibility of one or two more cuts this year. Lower interest rates are intended to stimulate economic growth and consumer spending by making borrowing cheaper. The article highlights three stocks to watch: Realty Income, a REIT, is expected to benefit from a lower cost of capital for acquisitions and refinancing, supporting growth and dividend stability; Bank of America, a major bank, may see its net interest income shrink in the short term as loan yields drop faster than deposit costs; and Visa, the world's largest payment network, is indirectly poised to benefit from increased consumer and business spending, leading to higher transaction volumes.
Background
The Federal Reserve significantly raised interest rates starting in 2022 to combat the highest inflation levels in decades, with the federal funds rate peaking at 5.5%. This action aimed to curb an overheating economy and rising prices by making borrowing more expensive. On September 17, 2025, the Fed's decision to cut rates by 0.25 percentage points signals a pivot from a tightening monetary policy to a more accommodative stance. Lower interest rates typically reduce borrowing costs for businesses and individuals, stimulating investment, production, and consumer spending, thereby supporting economic growth. The Fed's "dot plot" also indicates potential for further rate cuts, suggesting a policy focus shift towards economic expansion.
In-Depth AI Insights
What are the true drivers behind the Fed's rate cut, beyond overt economic stimulation? - While the article states rate cuts aim to stimulate the economy, given President Donald J. Trump's incumbency, there might be sustained political pressure from his administration to ensure robust economic figures leading up to the 2026 midterm elections. The Fed may be balancing its independence with governmental growth expectations. - Furthermore, risks of a global economic slowdown could also be a factor pushing the Fed towards easing. If major trading partners face economic weakness, the U.S. economy, even if robust, would not be immune, and rate cuts could serve as a precautionary measure. - The widespread market anticipation of cuts and the "dot plot" signaling further reductions suggest the Fed might be attempting to manage market expectations, aiming to avoid unnecessary economic shocks from overly rapid tightening and paving the way for a smooth economic transition. Are the long-term impacts of rate cuts on Realty Income and Bank of America as straightforward as presented? - Realty Income's direct benefit from lower rates is clear, but in the long term, if these cuts are a response to potential economic weakness, tenant financial health and overall real estate demand could be impacted, potentially offsetting some of the capital cost benefits. - For Bank of America, while net interest income might be pressured short-term, if rate cuts successfully stimulate the economy, increased loan demand and improved credit quality could support revenue in the long run. Banks might also mitigate pressure by adjusting deposit rates, and investment banking activities could rise in a more active M&A environment. Is Visa's growth outlook overly reliant on macroeconomic tailwinds as a payment network? - Visa's business model is indeed highly dependent on consumer and business transaction volumes. While rate cuts typically stimulate these activities, if macroeconomic headwinds (e.g., rising unemployment or prolonged consumer sentiment decline) emerge, its transaction volume growth could be challenging to sustain. - However, Visa also benefits from global payment digitalization trends and expansion into emerging markets. These structural growth factors could partially offset cyclical economic fluctuations, allowing it to maintain resilience across different interest rate environments. Investors should monitor its strategic deployment in new technologies and market penetration.