The risk to cutting now is that could reignite rally, spending and inflation. Once reignited, inflation has shown itself historically to be tougher to control.
Very thoughtful comments, Kathleen, thank you! You raise the crucial point about how Powell may react to the jobs report next Friday that is not considered "weak" because of extraneous factors which pulled July down. If his message on 9/18 is "wait & see" and market craters in response, will we see a Powell Pivot similar to his rookie year (January 4, 2019)?
Time for the hawks to go into hibernation. Hiring is slowing, wage growth stable but possibly under pressure. Finds at 5.40% inflation declining make the picture clear. Hours worked under pressure as well. Ivory tower theories need to be discarded. Time for pragmatic policy to cut rates before we get a credit event. That would be the last shoe to drop. If it happened guessing you would see a ff funds rate at 1% rather than 3%.
Inflation is 2.5%-3% and falling. Funds are 5.40%. This is not a difficult call. Btw employment is generally a lagging indicator. Many leading indicators of the economy are weak. If you are right the Fed can pause cutting rates more. If you are wrong the Fed is very late. Better safe than sorry!
Amen! I can hardly wait for the August jobs report on Friday. The July jobs report's jump in unemployment to 4.3% from 4.1% got many "big voices" pushing for a big rate, many them calling for an immediate, intermeeting aka emergency cut. I still say, Really? In fact St Louis Fed president Jim Bullard said no way on emergency cuts on the Monday after the jobs report got traders selling off stocks like crazy. Jim in fact said Fed will cut key rate by 25bps at September meeting. when I interviewed him on that Monday August 5. Unemployment popped up in large part because people entered the labor force -- usually considered a sign the labor market is strong enough to make people more confident that they can get jobs. AND the BLS completely glossed over the huge jump in people who could not get to work due to weather in the July survey week -- which was also the Texas hurricane week. I note all if this to say, what if August jobs report shows stronger payrolls increases and even a pull back in unemployment? People I have discussed this with say Powell has locked the September rate cut with his Jackson Hole speech. BUT his messaging may indicate more of a wait and see on the next hike than traders, and many economists, are clamoring for now.
The risk to cutting now is that could reignite rally, spending and inflation. Once reignited, inflation has shown itself historically to be tougher to control.
Very thoughtful comments, Kathleen, thank you! You raise the crucial point about how Powell may react to the jobs report next Friday that is not considered "weak" because of extraneous factors which pulled July down. If his message on 9/18 is "wait & see" and market craters in response, will we see a Powell Pivot similar to his rookie year (January 4, 2019)?
Time for the hawks to go into hibernation. Hiring is slowing, wage growth stable but possibly under pressure. Finds at 5.40% inflation declining make the picture clear. Hours worked under pressure as well. Ivory tower theories need to be discarded. Time for pragmatic policy to cut rates before we get a credit event. That would be the last shoe to drop. If it happened guessing you would see a ff funds rate at 1% rather than 3%.
Inflation is 2.5%-3% and falling. Funds are 5.40%. This is not a difficult call. Btw employment is generally a lagging indicator. Many leading indicators of the economy are weak. If you are right the Fed can pause cutting rates more. If you are wrong the Fed is very late. Better safe than sorry!
Amen! I can hardly wait for the August jobs report on Friday. The July jobs report's jump in unemployment to 4.3% from 4.1% got many "big voices" pushing for a big rate, many them calling for an immediate, intermeeting aka emergency cut. I still say, Really? In fact St Louis Fed president Jim Bullard said no way on emergency cuts on the Monday after the jobs report got traders selling off stocks like crazy. Jim in fact said Fed will cut key rate by 25bps at September meeting. when I interviewed him on that Monday August 5. Unemployment popped up in large part because people entered the labor force -- usually considered a sign the labor market is strong enough to make people more confident that they can get jobs. AND the BLS completely glossed over the huge jump in people who could not get to work due to weather in the July survey week -- which was also the Texas hurricane week. I note all if this to say, what if August jobs report shows stronger payrolls increases and even a pull back in unemployment? People I have discussed this with say Powell has locked the September rate cut with his Jackson Hole speech. BUT his messaging may indicate more of a wait and see on the next hike than traders, and many economists, are clamoring for now.