2024-07-16 09:24:14 ET
Summary
- The Fed needs to start easing monetary policy before reaching 2% inflation target to have desired impact.
- Markets pricing in soft landing for US economy with potential rate cuts by year end.
- Strong signs of soft landing from Russell 2000 index, small-cap stocks rally and improving market breadth indicate confidence in Powell-led Fed.
I have argued with my critics for months that the Fed needs to start easing monetary policy by lowering short-term interest rates well in advance of the central bank achieving its inflation target of 2%. This is because changes in policy take months, if not longer, to fully work their way though the economy and have their desired impact. During a speech he gave yesterday at the Economic Club of Washington, Chairman Powell reiterated that fact by stating that “if you wait until inflation gets all the way down to 2%, you’ve probably waited too long, because the tightening that you’re doing, or the level of tightness that you have, is still having effects which will probably drive inflation below 2%”...
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Chairman Powell Will Not Wait For 2% And Small Caps Love It