The Fed did about all the market could ask for this morning. No cut in rates (that was too much to ask), but acknowledgement of heightened risks and the willingness to cut rates later if need be.
1. I’ve always been a bit troubled (back to the Greenspan days) about the Fed’s apparent (obvious, at times) concern with pleasing financial markets. Not that financial markets aren’t key influencers of economic activity (they are!), but, for the most part, they’re viewed as reflections. Problem is, they’re the reflections of all market participants in the aggregate. What if the Fed efforts to please the market and it turns out that the market’s wrong? Read bubbles!
2. While he did his best to add a few ancillaries, Powell all but admitted that the main cause of the weakening data is the trade war. Thus, the only reason, at this juncture (while conditions remain decent) to cut rates is if the trade war persists. I.e., a trade deal in, say, July/August, means no Fed cuts this year. We’ll address this (the ideal) scenario as we go…