The Fed Blinks

There are a number of reasons for the Federal Reserve to make an interest rate decision.

I think that one of them is to assert its independence from elected politicians, which is why I thought that the Fed would not cut rates today.

I was wrong.  They did cut rates, which either means that they thought that the economic circumstances justified their not asserting their independence, (HAH!) or they pre-surrendered to Trump because they do not want to get fired.

My money is on the 2nd option, but attempting to get into the head of the FOMC is as much of a path to madness as reading the subway schedule for the city of  R'lyeh.

The Federal Reserve approved a quarter-point interest rate cut Wednesday, the first in nine months, with officials judging that recent labor-market softness outweighed setbacks on inflation.

A narrow majority of officials penciled in at least two additional cuts this year, implying consecutive moves at the Fed’s two remaining meetings in October and December. The projections hint at a broader shift toward concern about cracks forming in the job market in an environment complicated by major policy shifts that have made the economy harder to read.

Recent declines in the growth rate for both the number of people looking for jobs and those gaining employment have “certainly gotten everyone’s attention,” Fed Chair Jerome Powell said at a news conference.

Powell, who referred to “downside risk” six times at a news conference in July, said on Wednesday, “That downside risk is now a reality.”

The Fed’s carefully drafted postmeeting statement pointed to those concerns when it said the rate cut was justified “in light of the shift in the balance of risks.” The statement no longer described the labor market as “solid.”