Why is the Fed cutting rates?

While the Fed is still all but certain to cut rates later this month, the case for them doing so is getting weaker. In other words, economic data is getting stronger. Consumer spending grew at an impressive 4.3% annual rate in the second quarter, and manufacturing output also advanced more than expected. The most recent job report was similarly strong.

 

The fact the Fed is still foreshadowing rate cuts suggests they are focusing more on global issues (potential for further trade disruptions) than on the U.S. economy itself. However, that would be something new for the Fed, and out of step with what it has done in the past. And the stock and bond markets certainly aren’t signaling the kind of distress that usually accompany such cuts (and in fact, the stock market is at all-time highs).

 

As the author of the article below puts It, while the Fed’s job was once said to be “to take away the punch bowl just as the party gets going, today’s Fed plans to spike the punch bowl instead.” That could be good news for stock investors, at least for a while.

Read more from the Wall Street Journal…

Photo by Nick Demou from Pexels

 

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