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Maybe Jerome Powell Sent Stocks Exactly The Right Message After All

What would it say about the state of things if the Fed had indicated three cuts were necessary this year?

What would it say about the state of things if the Fed had indicated three cuts were necessary this year?
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3 comments on “Maybe Jerome Powell Sent Stocks Exactly The Right Message After All

  1. I’m not enough of a historian to say for sure, but I can’t recall any time when the Fed launched a stream of rate cuts in time to prevent a downturn.

    While it is tempting to attribute that to an inability to accurately predict recessions, I think the signaling aspect H mentioned is also a constraint. If the Fed announces a series of cuts, that is the same as broadcasting “recession alert”, which is likely to bring on exactly that.

    In this case, the perverse feedback loop between rate cuts and tariffs make the downside of announcing a series of cuts even greater. It would essentially mean triggering a series of tariff increases, which have economic effects contrary to and greater than the rate cuts.

    So I think the Fed’s realistic choices were limited to “no cut and assess” and “one cut and assess”. That Trump immediately followed the cut with a tariff must reinforce the Fed’s (presumed, because they’re not stupid) concern that further cuts will simply trigger further tariffs.

    Simplistically, the Fed has 200 bp of rates in its quiver but Trump has 75-90% of tariffs in his.

  2. Anonymous

    They need to raise rates not lower them. Shiller put up a brilliant piece explaining why this is and was the wrong policy decision. I hope markets continue to selloff, there is a TON of bloat and even if the big 3 fell 50% we’d still be way above the 2009 lows. If not for all the DEBT creation and QE we’d probably still be scraping the recessionary bowels of hell. Eventually the piper needs to get his money, this reckless policy of inflating bubbles and assets of all kinds will eventually lead to ruin for many except the wealthy, they never will know how it feels to not have basic necessities, they will sell a few pieces of art if need be and cut the salaries and jobs of their workers and demand twice as much from them before they tighten their belts fiscally at home. Greed will be their undoing, history will repeat itself, anyone up for a French Revolution 21st Century style?

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