Fed’s Rates Descent Can Start With a Step or Jump
The odds are 50-50 on a jumbo 50 basis points, but either way Powell won’t be alone at the peak any longer.
The Fed has some catching up to do.
Photographer: Jon. G. Fuller/VW Pics/Universal Images/Getty Images
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Not long now. On Wednesday, the world’s biggest economy joins the rate-cuts party. While the Federal Reserve’s inflation fight is far from over, the pace of price increases has stalled, and interest rates remain at their highest in recent decades. Jerome Powell’s ability to embark on an aggressive hiking cycle and maintain rates for such an extensive period without the economy slipping into a recession — yet — is both confounding and commendable. Investors’ firm belief that the easing cycle is commencing tends to vindicate monetary policy signaling, which has a surprisingly short history. The first Federal Open Market Committee meeting press conference didn’t come until 2008 under Chair Ben Bernanke. Before that, the Fed operated in what today would feel like a black box. Only a statement — the first came from Alan Greenspan in 1994 — was issued to announce changes to policy.