Wall Street Reacts To Powell's "Risk-Management" Rate Cut

As Powell begins his presser, Wall Street's kneejerk comments start coming in to what the Fed Chair just characterized as a “risk management” rate cut... similar to the rate cut he announced exactly one year ago, only that one was 50bps not 25bps (wonder why).

As expected, Powell is getting a hard time from reporters who have spotted inconsistencies in the decision and rationale compared to the forecasts. Here, the Fed has cut rates and has signaled that in all probability will cut twice more this year. Yet against that it has economic growth speeding up, the jobless rate coming down and inflation back to (just above) target at the very end of the forecast horizon. In particular, he is being pushed on why the Fed has switched over to the jobs part of the mandate. Indeed even in Powell‘s own comments, it doesn’t really come across: “Right now, the situation we're in is that we see, we see inflation, we continue to expect it to move up maybe not as high as we would have expected it to move up a few months ago.”

And while Powell is scrambling to preserve some credibility (especially since exactly one year ago he cut 50bps when the economy was much stronger), here is a snapshot of some of the first comments hitting the tape:

The tone overall favors growth concerns right now as the Fed is showing rates still coming despite inflation remaining above the 2% target. The lack of more dissents shows more unity around the pathway to more neutral rates. Overall, a steadfast, methodical pathway down to neutral.