06 Aug THE FED’S COURSE CORRECTION
The Federal Reserve (Fed) completed its U-turn in policy last week. Policymakers announced a 25-basis point (0.25%) rate cut July 31, its first
in 10 years.
Rate cuts have been a sobering reality in investors’ short-term memories, as the Fed resorted to a series of rate cuts to get the U.S. economy out of the depths of the financial crisis in 2008–09. The economy is much different now—in strength and in structure—so it has been difficult for investors to understand the Fed’s intentions in this decision.
Fed Chair Jerome Powell’s post-meeting comments made it clear to us that this rate cut was a “course correction” in policy, a common strategy in economic expansions (except for the previous one). We believe the cut was justified despite a largely steady economy and that the economic impact will be in line with the Fed’s intentions.