One-Third of Investors Disagree With Lowering Interest Rates

This week’s Sentiment Survey special question asked AAII members what they thought about the Federal Open Market Committee’s (FOMC) decision to lower interest rates for the first time since 2008. More than 30% of responses say that the decision to lower rates was a bad idea. Additionally, 13% of respondents say that the decision was premature and will limit the Fed’s options when a recession is in full force.

Approximately 23% say that the decision to lower rates is the correct response to ongoing trade wars and global economic slowdowns. Nearly 20% of respondents describe themselves as uncertain and say that they don’t believe the decision will have a long-term impact. Finally, 14% of respondents state that the decision was politically motivated and not necessarily needed.

Here is a sampling of the responses:

• “Feels like a bad decision. They should have maintained the rate so that there would be more room to adjust rates when needed.”
• “I think the Fed’s response was just right. The market needs stability to succeed now, not wild gyrations. Let’s wait for the effect from this reduction and consider a change next year.”
• “I think the decision is positive in terms of balancing against negative market factors like Chinese tariffs and currency devaluation from China.”
• “Strongly disagree. Powell gave into political influence. Interest rates are a fundamental tool of the Fed and the reduction was premature.”
• “Neutral. I am not convinced that it was necessary with unemployment being at record lows and the stock market at record highs.”

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