Comment by toomuchtodo
Comment by toomuchtodo 4 days ago
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.
75 would shock the market & probably hurt Warren's party. 50 has been stated as something that may scare the market into thinking the Fed is worried more than letting on. They could maybe do 50 if they give a lot of context & forward guidance & take the next meeting off of rate cuts instead of the expected 25, 25, 25. Many are also very concerned we could make inflation sky rocket by cutting to fast, especially if the next president were to increase tariffs on a lot of goods.
I sometimes wonder if Warren is playing 3D chess. I assume she is far smarter than me on these topics but her proposals often make no sense to me. She also never gives good logic to the public behind them, even on long form one on one interviews with someone sympathetic to her cause interviewing her.
Fed also really did not want to cut rates this close to the election. They want to be neutral but they've done a great job of forward guidance & reacting to the data.