Despite a policy pivot earlier this year and an even clearer shift just last week, the Federal Reserve remains miles apart from what Wall Street wants.
Central bank officials have indicated that a rate cut is at least on the table, but the market is demanding more — so much more, in fact, that a conflict between the current designated path of monetary policy and the amount of support that investors feel is necessary seems on a collision course.
“We’re heading for a reckoning,” said Danielle DiMartino Booth, CEO of Quill Intelligence and advisor to then-Dallas Fed President Richard Fisher. “This is where policy errors begin to happen, when the Fed cannot acknowledge they’re actually damaging the economy.”
Fed Chairman Jerome Powell, through his statements since the June 18-19 Federal Open Market Committee meeting, and his fellow central bankers via the “dot plot” of their rate expectations, at least has nodded that one rate cut could be coming if conditions continue to weaken.
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