Fed September Rate Cut?
A 25 BPS September rate cut would be symbolic but little more.
A 50 BPS September rate cut would move the needle, but would be viewed as helping the Democrat Party in an election year.
The Fed has held rates too high for too long. Aggressively shrinking M2 was the Fed’s missed opportunity to control price increases.
The next best thing to do would be to cut Fed Funds by 25 BPS points now, while making it clear to the market that the Fed will continue to hold its present modest pace of shrinking the money supply.
Potentially do another 25 BPS rate cut during Jackson Hole later this month while sending the same message about the money supply.
The Fed has wrongly abdicated the element of surprise by telegraphing rate movements and only executing rate movements during FOMC meetings. This Fed under Jerome Powell is anything but strategic.