Proceedings of the 2025 International Conference on Financial Risk and Investment Management (ICFRIM 2025)

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Study of Effects of the Fed’s Interest Rate Cut on Stock Market Based on VAR Model

Authors
Ziqian Li1, *
1College of Economics and Management, China Agricultural University, No.17 Qinghua East Road, Haidian District, Beijing, 100083, China
*Corresponding author. Email: 2023311320119@cau.edu.cn
Corresponding Author
Ziqian Li
Available Online 3 July 2025.
DOI
10.2991/978-94-6463-748-9_57How to use a DOI?
Keywords
Federal Reserve’s interest rates cut; Stock market; Inflation; Market expectation; VAR model
Abstract

The interest rates cut always has significant influence on countries’ economic, especially on the stock markets. On Sept. 19th 2024, the Federal Reserve announces the cut of Federal Funds Effective Rate, which caused some impacts on stock markets. To improve the accuracy of the conclusions of the empirical analyses, the study utilizes VAR model and the data of Fed Funds Rate, Consumer Price Index, Volatility Index and S&P 500 collected on a monthly basis from December 2000 to October 2024 to analyse the effect of Fed’s interest rate cut on stock market. The results showed that Fed’s interest rate cut has negative impact in short term, and positive impact in long term. Short-term impact effects are greater than long-term impact. Actionable recommendations for investors, corporations, and policymakers are provided accordingly. For investors, monitoring monetary policy changes, diversifying asset allocation, and optimizing financing strategies is advised. For corporations, focus on leveraging opportunities and adjusting financing strategies to enhance resilience in a low-interest-rate environment. For policymakers, strengthening macroeconomic regulation and reinforcing macro-control mechanisms to safeguard economic stability is worth mentioning.

Copyright
© 2025 The Author(s)
Open Access
Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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Volume Title
Proceedings of the 2025 International Conference on Financial Risk and Investment Management (ICFRIM 2025)
Series
Advances in Economics, Business and Management Research
Publication Date
3 July 2025
ISBN
978-94-6463-748-9
ISSN
2352-5428
DOI
10.2991/978-94-6463-748-9_57How to use a DOI?
Copyright
© 2025 The Author(s)
Open Access
Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

Cite this article

risenwbib
TY  - CONF
AU  - Ziqian Li
PY  - 2025
DA  - 2025/07/03
TI  - Study of Effects of the Fed’s Interest Rate Cut on Stock Market Based on VAR Model
BT  - Proceedings of the 2025 International Conference on Financial Risk and Investment Management (ICFRIM 2025)
PB  - Atlantis Press
SP  - 509
EP  - 519
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6463-748-9_57
DO  - 10.2991/978-94-6463-748-9_57
ID  - Li2025
ER  -