Daily update
Daily update
- The US rate-cutting cycle began with a 50bp cut—the sort of move normally reserved for an economic emergency. The US has near full employment, steady consumption, and rising real wages. This is no economic emergency. It is not plausible to claim Federal Reserve Chair Powell knows something economists do not (especially after yesterday’s press conference). The fact that a Fed governor dissented for the first time in 19 years helped reduce the impression of panic.
- What did the Fed’s tightening accomplish? Most of the decline in US inflation over the past two years would have happened, regardless of Fed policy. Fed policy may be adding to inflation today via housing price measures (both real and imagined). Rates needed to rise from 2021 levels, but the soft economic landing is due to the US middle class, not Fed Chair Powell.
- The Bank of England has already decided on policy rates—that verdict is just announced today. The expectation is for no change, although another rate cut later this year seems reasonable.
- There are assorted ECB speakers scheduled, which markets will tend to ignore. US weekly initial and continuing jobless claims data are not subject to political bias, and should continue to signal a solid labor market.
