It doesn’t seem that long ago that markets were sifting through the entrails of the Fed’s last policy decision and subsequent press conference from Fed Chair Powell.
That meeting decided on a 50 basis point (bp) policy rate cut over the option of a smaller 25 bp increment.
The decision to opt for the higher quantum of reduction reflected a view that the inflation risks have diminished while labour market conditions, while consistent with a “soft landing”, were at some risk of deterioration.
Chairman Powell was careful, however, to characterise the labour market as still fundamentally healthy, casting the Fed decision to cut 50bps as preserving a strong labour market rather than reacting to one that was in a state of weakness.
That characterisation might have been designed to prevent markets anticipating “too much” easing.
Read Stephen’s ‘On the other hand’ here
