Does Wednesday's decision change the short-term economic outlook in any substantial way?
As ever, Jerome Powell is on the hot seat. Photo: Andrew Harrer/Bloomberg via Getty Images Ben: The Fed announced that it would cut interest rates by a quarter point today. What is it hoping to accomplish with this adjustment, and why did stocks fall after the news was announced?
But then the market rebounded, I think in part because Fed chair Jay Powell sounded marginally more dovish at the press conference than in the statement. He was not very dovish though: He stubbornly refused to tip his hand about whether the Fed would cut rates a third time later this year, emphasizing that the Fed will make an appropriate decision based on the economic and financial information that’s available at the time.
It’s harder to make commitments on behalf of a group where you don’t know what you’ll be able to get its members to agree to. The argument for this view is essentially that inflation remains below target and the labor market is not as tight as it looks so the Fed is not meeting its dual mandate of full employment and stable prices, and would better do so by raising prices.
Fed chairs used to do four press conferences a year, but Powell has increased that to eight, one after every FOMC meeting. That gives him more opportunities to accidentally send the wrong signal to the markets through his comments. But it seems like he has gotten more careful.
Ben: Would you say that today’s decision changes the short-term economic outlook in any substantial way?
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