I supported a 50 bps cut as a compromise between remaining uncertainty around inflation and risks to the labour market.The economy is returning to normal faster than expected so policy should as well.Recent data show convincingly that the US economy is on a sustainable path to price stability.A half-point cut at this meeting does not lock in a cadence for future rate cuts.Risks to the labour market have increased, with the possibility of broad weakness higher than a year ago.Price increases have narrowed and become concentrated in housing.The economy is effectively near conditions that would be considered normal.Businesses are becoming more careful in hiring but not considering layoffs.The Fed is now facing two largely balanced risks.Low recent levels of some recent inflation indicators portends well.Business leaders say pricing power has all but evaporated.The labour market is weakening but not weak.A disagreement over the level of the neutral rate is inconsequential when rates are this high.
This article was written by Giuseppe Dellamotta at www.forexlive.com.
