Opening Statement from the August 2019 Intelligent Investor (part 1)
Originally published on August 7, 2019 (pre-market release)
Fed Cuts Rates Despite Lack of Sufficient Data
On July 31, 2019 Fed Chairman Powell announced the most highly anticipated change in interest rates in more than a decade. With 100 percent of fed funds futures traders betting on a rate cut for several weeks prior to the Fed’s July FOMC meeting, the Fed did not disappoint when it announced a 25-basis point cut in the federal funds rate when it met.
Notably, two fed officials were against cutting interest rates during the July meeting, making it the least agreed upon monetary policy action since Powell was appointed as chairman of the Fed. We believed rates would most likely be cut even though there was insufficient economic data to justify a cut. Boston Fed President Eric Rosengren and Kansas City Fed chief Esther George also believed there was insufficient data to justify a rate cut. Both officials cited strong employment data favoring tightening (if anything) as well concerns of excessive leverage in the financial system. Subscribers to the Intelligent Investor and Market Forecaster recall we mentioned these same points in the past, focusing on leverage most recently in the July 2019 issue.
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