Jerome Powell’s No Cut Thunderbolt
Groucho Marx famously said he would not join any club that would have him. What happens, however, when the club joins you?
We have been arguing since early December that economic growth was too strong to justify an interest rate cut in the first quarter of this year. Unemployment remained ultralow and consumer spending strong. The disinflationary forces of the first half of 2023 appeared to be losing steam in the second half, making ongoing progress on bringing inflation back to the two percent target far from a sure thing.
For a long time, this was a lonely place to stand watch while the market priced in a near certainty of a cut at the March meeting. Even as the incoming data showed the economy was not faltering and inflation was actually ticking up a bit, the “club” of Wall Street persisted in the view that the Fed would cut.
On the…
