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Fed Chair Jerome Powell has for months - feels like years, frankly - reiterated the need for “more data.”
On Capitol Hill this week, he nodded to the risks of waiting too long to ease rates, with an eye out for a cooling labor market. Wall Street took his remarks as another optimistic sign that cuts are on the way. And now with Thursday’s encouraging inflation data, which arrived with the unambiguous glee of a birthday party blower, has the Fed finally gotten what it needs to make a move?
Markets are saying what Powell can’t: Yes.
Last week brought the latest evidence that the Fed should turn to mind its full employment mandate. The June jobs report showed the unemployment rate ticked up for the second month in a row to 4.1%, the highest level since November 2021. The figure is not historically high, but in the pandemic-era tightening cycle, it’s getting up there.
As jobs data downsides are piling up, a streak of favorable inflation data is shaping into a trend. Things finally seem like they are falling into place.
“A September rate cut should be a done deal at this point,” said Lazard chief market strategist Ron Temple. "Given the increasing evidence of slowing economic growth, it’s time for the Fed to refocus on the dual mandate and ease monetary policy.”
Powell’s critics have hammered his leadership for being too reliant on backward-looking data. But when the good news is resoundingly good and the bad news starts to turn ugly, that may be when enough is enough.
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