WSJ Nick
The August employment statistics were not bad enough to confirm a 50bps rate cut as the next move by the FRB, but it was not enough for officials to deny a rate cut on Friday.
Officials left the options open in their speech on Friday, neither affirming the possibility of a significant rate cut nor denying it. As a result, a tough decision will be made at the meeting in the second half of this month, probably by Chairman Powell.
One option is to conclude that a 50 basis point rate cut is justified due to the soft employment since the previous FRB meeting in late July. While FRB officials kept interest rates unchanged on July 31, they might have conducted a 25 basis point rate cut if they had known about the weak employment statistics released two days later. Given that the August employment statistics were also mediocre, the FRB would have likely conducted another 25 basis point rate cut in September.
The second option is to indicate the possibility of further rate cuts being made several times when officials create quarterly economic forecasts announced at the meeting after a 25% rate cut in September.
Officials left the options open in their speech on Friday, neither affirming the possibility of a significant rate cut nor denying it. As a result, a tough decision will be made at the meeting in the second half of this month, probably by Chairman Powell.
One option is to conclude that a 50 basis point rate cut is justified due to the soft employment since the previous FRB meeting in late July. While FRB officials kept interest rates unchanged on July 31, they might have conducted a 25 basis point rate cut if they had known about the weak employment statistics released two days later. Given that the August employment statistics were also mediocre, the FRB would have likely conducted another 25 basis point rate cut in September.
The second option is to indicate the possibility of further rate cuts being made several times when officials create quarterly economic forecasts announced at the meeting after a 25% rate cut in September.
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