Fed policymakers signal rate cuts ahead, but not because of market rout

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Aug 8 - Federal Reserve policymakers are increasingly confident that inflation is cooling enough to allow interest-rate cuts ahead, and they will take their cues on the size and timing of those rate cuts not from stock-market turmoil but from the economic data.

"It's hard to make the case that something has just happened that is monumental on the equity side," Richmond Federal Reserve Bank President Thomas Barkin said on Thursday, noting major U.S. stock-market indices are still up from the start of the year. "I think you've got some time in a healthy economy to figure out whether this is an economy that's gently moving into a normalizing state that will allow you to, in a steady deliberate way, normalize rates or ... is this one where you really do have to lean into it."

"However, the Fed has to remain focused on achieving its dual mandate" of full employment and price stability. Schmid described the economy as resilient, consumer demand as strong, and the labor market as noticeably cooling but still"quite healthy," and said he views the current policy stance as"not that restrictive."

 

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