Fed decides to go ahead with December rate cut – but it’s not actually good news
The post Fed decides to go ahead with December rate cut – but it’s not actually good news appeared on BitcoinEthereumNews.com.
The Federal Reserve will almost certainly slash interest rates at its December meeting. Friday’s jobs report sealed the deal, offering the Fed enough breathing room to act without looking reckless. Nonfarm payrolls rose by 227,000 in November, blowing past expectations, while unemployment inched up to 4.2%. Markets barely blinked, with CME Group now pricing in a 90% likelihood of a cut. But here’s the thing: this isn’t the good news it might seem. Critics are already piling on, accusing the Fed of setting the stage for risky speculation. Inflation is still alive and kicking, wages are climbing, and some say financial conditions have become too loose. Meanwhile, the central bank faces tough questions about just how far it can push without throwing the economy off balance. Why the timing looks shaky Economists are split, and the skeptics are loud. Chris Rupkey, an economist, argued the Fed doesn’t need to meddle, especially when jobs are plentiful. He called the central bank’s strategy “increasingly unwise” and warned that inflation hasn’t been tamed. The numbers back him up. Core inflation, measured by the Fed’s favorite yardstick, ticked up to 2.8% in October. That’s far above the Fed’s 2% target. Wage growth isn’t helping either. At 4%, it’s significantly higher than pre-pandemic norms. Jason Furman, a former Obama administration economist, isn’t buying the Fed’s optimism either. He pointed out that the pace of wage growth aligns more with 3.5% inflation, not the 2% the Fed wants. “This is another data point in the no-landing scenario,” Furman said. He predicts more rate cuts will follow, but only after unemployment climbs further. Financial conditions are looser than they look Fed officials like to call their 4.5%-4.75% interest rate “restrictive,” but financial conditions tell a different story. Stocks are up, bond yields are down, and mortgage rates…
Filed under: News - @ December 8, 2024 11:16 am