Tl; dr: Despite only 9 of 113 economists surveyed expecting a 50bps rate-cut, Powell and his pals did it. At the same time they slashed their 'DOTS' expectations for rates, despite not adjust growth expectations, barely adjust unemployment, and hoping for lower inflation.
You see, The economy is so great, it needs an crisis-level rate cut 2 months before the election.
And all this two months before the election... amazing!
50bps cut... uber-dovish Dots... Powell pushed back... stocks end red, dollar and yields end higher.
“The US economy is in a good place and our decision today is designed to keep it there,” said Fed Chair Pay Powell during the press conference.
So a crisis-level 50bps rate-cut at record highs for stocks and home prices, just two months ahead of the election is warranted because the "economy is in a good place."
The next time the Fed meets, voters will have already cast their vote for the next president.
Powell on incorporating political factors into Fed decisions:
“We just don’t do that.”
But Kamala liked it:
"The Fed's rate decision is welcome news for Americans."
And none other than Democratic Congresswoman Maxine Waters of California applauded the Fed’s rate cut in a statement:
“I am pleased that the Fed has not only remained independent, but shown the importance of remaining independent as it followed the data and not politics.”
It's a good job The Fed is "strongly independent"!!!
US Stocks kneejerked higher with Small Caps exploding almost 2.5% at their highs on the FOMC statement and SEP. The S&P 500 also briefly hit a new record high. However, once Powell started speaking, all the majors reverted lower (back into the red).
Source: Mkt Watch
ASX200 futs are pointing down 40 pts.
Today is also Sept24 Index option expiry.
Someone should remind the Fed that 'Hope' isn't an investment strategy.
Source: Bloomberg
Of course, let there be no doubt that if inflation re-accelerates from here, you can bet on the fact that Trump will get the blame completely.
Happy Thursday!
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Andy is the founder of ANDIKA Pty Ltd, a licensed securities & derivatives dealer. He's the author of fiction and non-fiction books and has been a University lecturer on risk and investment.
