Comment by blackeyeblitzar
Comment by blackeyeblitzar 4 days ago
Maybe but they’re facing political pressure from the left, like Elizabeth Warren, to basically make the economy at least look good artificially. And they may do that. Will it be a sustainably better economy? I doubt it given federal debt and what feels like shaky employment levels.
Cutting 75 basis points instead of 25 or 50 (as Warren is and others are advocating for in the letter they sent Chair Powell) isn't attempting to make the economy "look good artificially." I strongly believe it is important to demonstrate this signaling is not about optics. It is to put more effort into preserving the health of the labor market by pulling forward rate cuts the Fed will be performing regardless (with some amount of risk of inflation being a bit sticky). If you are familiar with her background, this should come as no surprise (labor > capital and other econ metrics). She's doing her job by advocating for an aggressive monetary policy stance (imho). This also aligns with Fed statements recently indicating they are willing to act to protect the labor market.
https://apnews.com/article/federal-reserve-inflation-powell-... ("Powell stresses message that US job market is cooling, a possible signal of coming rate cut")
> “We’re not just an inflation-targeting central bank,’’ Powell told the House Financial Services Committee on the second of two days of semi-annual testimony to Congress. “We also have an employment mandate.”
> Powell told the House panel on Wednesday that to avoid damaging the economy, the Fed likely wouldn’t wait until inflation reached its 2% target before it would start cutting rates.