The Federal Reserve unexpectedly cut interest rates by 50 basis points, a move rarely seen outside emergencies. Despite falling but persistent inflation and robust economic growth, the Fed chairman cited a softening labor market as justification for the preemptive strike.
Cuts of this size are rare, and have traditionally been used in only emergencies. The last two times the Fed cut by 50 basis points were in January 2001, as the dotcom bubble was bursting, and in September 2007, when the GFC was just gathering pace.
“We don’t think we’re behind,” Powell declared. “You can take this as a sign of our commitment not to get behind.”“I don’t see anything in the economy right now that suggests that the likelihood of a recession, sorry, of a downturn is elevated,” he told the press conference. By couching his super-sized rate cut with reassurances on the state of the economy, Powell is trying to tell the market that it’s all under control, that the economy won’t deteriorate in a way that will result in a hard landing.
Peter Berezin, chief global strategist at the influential BCA Research, is one of those who got his rate cut call wrong and is sceptical of Powell’s soft landing message.
Federal Reserve Interest Rates Economic Growth Inflation Labor Market
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