The market’s reaction today to the absence of a strong 50 basis point signal from Waller should come as no surprise.
This is what I wrote in June:
It’s been a long time since we’ve seen a “normal” price-cutting cycle so it’s worth reminding yourself of what’s going on and what needs to be done. always What happens: The market turns into a whiny teenager. It starts screaming and protesting for lower interest rates, with stocks bleeding on anything that isn’t overtly dovish.
If you don’t like this reference, think of it like a little kid who wants candy. They always want more and they want it now. As a father of four young children, there is no way to satisfy them.
This is exactly how markets reacted in 2008, in 2016 when interest rate hikes came too early, and during the tantrum that followed the tapering of monetary stimulus. The episode in 2019 was somewhat less severe because Powell was seen as preemptively easing policy.
Federal Reserve Funds Target Rate History: