So the basic job of Fed is to maintain steady employment and 2% inflation target, and how they do this is by maintaining required interest rate. This part I get 100%
in past every time there is a sudden rate cuts, it means they are panicking and underlying market conditions are not looking good. Rise in unemployment, either we are into or going towards recession. However, this time there is 0.5% rate cut this week, and already hinted for another 0.5% rate cut by end the year. Thats almost 1% full rate cut in a quarte seems unprecedented if we are not in recession.
So since market is reacting so positively, we are officially saying that we have a balanced unemployment and inflation to support unprecedented rate cut meaning “Soft landing”? Because if not then we are in Recession = “Hard landing”.
Just want to understand these are the only two scenarios or something else as well?
Leave a Reply