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The job market is in a tailspin and the CEO Refrain from hiringThe Federal Open Market Committee cut interest rates by half a percentage point on Wednesday. 23-year high It will range from 4.75% to 5%.
Economists have been predicting the long-awaited decision, with EY senior economist Lydia Boussour telling Entrepreneur magazine last month that there would be three rate cuts of at least 0.25 percentage points each in September, November and December.
Federal Reserve Chairman Jerome Powell Explained the September decision At a press conference on Wednesday, he said the Fed is “following its dual mandate to foster maximum employment and price stability for the American people…As inflation has fallen and the labor market has cooled, the risks of upside inflation have decreased and the risks of downside employment have increased.”
Related: The Fed has finally cut interest rates for the first time in four years. Here’s what this decision means for your wallet.
In a separate statement, EntrepreneurExperts from EY and JPMorgan agreed that the Fed acted “agilely.” They differed on whether the Fed was lagging behind.
Federal Reserve Chairman Powell. Photo by Anna Moneymaker/Getty Images
Elise Ozenbaugh, Head of Investment Strategy JPMorgan Wealth ManagementHe said the Fed made the decision with “confidence and resolve” and that the 0.5 percentage point cut “preserves the agility to maintain the Fed’s oft-emphasized data-dependent approach” and “creates space” to proceed more slowly at future meetings based on data.
Meanwhile, EY chief economist Gregory Daco agreed that policymakers could cut interest rates gradually at upcoming meetings, predicting incremental cuts of 0.25 percentage points each in November and December.
But Daco raised more fundamental concerns about the Fed’s approach to monetary policy. While Ozenbaugh said the Fed’s decision eases concerns that the central bank is becoming outdated, Daco argued that the Fed’s easing cycle shows that “two old demons continue to haunt the Fed.”
For one, Daco said the Fed isn’t taking a forward-looking approach and is relying on data points.
Related: August jobs report didn’t live up to expectations — what this means for interest rates
“Chairman Powell’s comments that the Fed might have cut rates in July if it had had the July jobs report in hand reflect this reactionary stance,” Daco said. Powell said on Wednesday that the Fed July employment report released They may also cut interest rates before their July meeting, as the report noted that unemployment has hit a record high. Best The peak since October 2021 was 4.3%.
Other analysts say Head of Research at FundstratTom Lee has taken a similar stance, saying the Fed relies too much on data to make decisions.
The second weakness, in Daco’s view, is that it doesn’t indicate how long it will take the Fed to reach its goal. Neutral policy stance One that neither stimulates nor restricts growth.
Related: Elon Musk calls the Fed ‘stupid’ and says they need to cut interest rates
“This does not appear to be part of the Fed’s communications strategy,” he said.
According to Chairman Powell’s speech on Wednesday, the Fed’s goals are maximum employment, stable prices and a 2% inflation target.
“We are not on a predetermined path and will continue to make decisions on a meeting-by-meeting basis,” Powell said.
Related: ‘Just one more post until comments are disabled’: Federal Reserve Chairman Jerome Powell joins Instagram and enters the influencer era
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