Americans are more confident about the economy after the Fed reduced interest rates

The consumer confidence index in October was 70.5 points, a slight increase compared to 70.1 points the previous month and 40% compared to the record low in June 2022 – the time when inflation in the US peaked. This index has increased for 3 consecutive months, reaching a half-year high, but is still lower than before the pandemic.

“This month’s improvement is mainly due to sentiment that purchasing durable goods will be more affordable, partly due to lower interest rates,” Joanne Hsu – Director of Consumer Surveys at the University of Michigan said in the announcement. fox.

Last month, the US Federal Reserve (Fed) reduced interest rates for the first time in more than four years, partly thanks to inflation being controlled. Lower borrowing costs will help Americans buy durable goods, such as cars, furniture, and appliances, at cheaper prices. These items are often purchased with a credit card.

However, good sentiment is not necessarily a true indicator of actual purchasing behavior. The US government’s latest report on retail sales, released last week, showed a decline in durable goods sales in September. Another report released on October 23 showed that the number of new durable goods orders at US factories decreased by 0.8% in September. This is the second consecutive month that this figure has decreased.

However, the Fed has announced plans to further reduce interest rates, if the economy performs as expected. This could help Americans spend more confidently.

“Even though lending rates have not yet begun to decline, consumers know that the Fed will reduce them further. Low interest rates and increased consumer confidence will be the backbone of economic growth,” Robert Frick – economist at the Navy Federal Credit Union commented.

The University of Michigan report also shows that more and more Republican consumers are more confident in Mr. Donald Trump’s victory over Ms. Kamala Harris. The US presidential election will take place on November 5. Recent polls show that the gap between the two candidates is very close.