The Fed Might Be More Dovish Than Powell Thinks: Bill Dudley

If the US Federal Reserve cuts interest rates next week, it’ll be acting in part on a crucial assumption: that monetary policy is currently restrictive, holding the economy back.

This belief could prove to be dangerous.

Chair Jerome Powell has argued that the Fed should be aiming toward a neutral monetary policy, on the grounds that recessionary risks in the labor market — highlighted by recent anemic job growth — offset the inflationary risks of higher import tariffs. Hence, I expect the central bank to cut the federal funds rate by a quarter percentage point at next week’s policymaking meeting, ...