Since it began raising interest rates at its March 2022 Federal Open Market Committee (FOMC) meeting, investors have been keeping an eye on the Federal Reserve in anticipation of rates finally being cut after inflation has continued to subside. When the central bank ultimately makes that decision, it will have an outsized impact on sectors sensitive to higher interest rates.
Passive income investors have long enjoyed the yields provided by real estate investment trusts (REITs). Because of their tax-advantaged pass-through structures, REITs can offer high yields as they are required by law to distribute at least 90% of their net earnings to shareholders as dividends.
Currently, the Chicago Mercantile Exchange's FedWatch Tool is pricing in a 100% chance of a cut for the Sept. 18, 2024, FOMC meeting, with an 85.8% likelihood of the effective federal funds rate being lowered to the 500 bps to 525 bps range.
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