Originally Published August 1, 2019
The initial market reaction to the Fed's decision to cut the Fed Funds target range by 25 basis points is clear: 25 basis points is not enough. We expect more rate cuts soon. Here's why:
- The FOMC statement and Fed Chairman Powell's opening comments at today's press conference are an unambiguous signal that inflation expectations are a key component in the Fed's decision. Inflation has been lower than the Fed's 2% target, and market expectations for inflation have been low. The immediate reaction from markets that price inflation, such