On the September FOMC

It’s 50 bp, not the 25 bp we had expected. The 2024 “dot plot” was moved down to anticipate 25 bp cuts at both the November and the December meetings. We continue to believe this doesn’t matter one way or the other, despite the seeming aggressiveness of it. The Fed has not been as restrictive as it has thought, or there would have already been a recession. The statement added language expressing commitment to “supporting maximum employment,” setting it next to returning inflation to target for the first time since June 2022. But the labor market is at the Fed’s mandate of maximum employment, as Powell acknowledged today. He is right in seeing this cut as not the result of being behind the curve, but assuring that the Fed doesn’t get behind the curve.