Official - Will The Fed Cut Rates? on 9/18 Discussion

[ahnuld]

I dont see how 25bp now will cause inflation risk to increase. Its not the fed bailing out the market but responding to a slowing economy.

[DcifrThs]

[ QUOTE ]
I dont see how 25bp now will cause inflation risk to increase. Its not the fed bailing out the market but responding to a slowing economy.

[/ QUOTE ]

well, in theory, it probably shouldn't since it is a small relative change in a time when it is seen by the markets to be needed.

but in reality, one major driver of inflation is inflation expectations. a 25 bp cut now could cause planning for future inflation to occur.

the counter argument is that the fed has been so good at retaining a low inflation rate that businesses will hold onto that faith until data disprove it.

i believe, like you, that a 25bp cut won't spark inflation...

but we are at a place now where inflation could EASILY increase quickly. capacity utilization is at 82.2%, .2% higher than concensus and really surprising. that is freaking high.

the main message the fed should send, again imo, is that there is no more and will be no more "fed puts." if you take risks, you pay the consequences.

Barron