We noted a few days ago that the Fed’s decision to lower interest rates wasn’t unanimous.  Two Fed voting members dissented, including Eric Rosengren of the Boston Fed.  Most interestingly, Mr. Rosengren released a memo two days later revealing his logic and justifying his decision in a series of charts.

https://www.bostonfed.org/news-and-events/press-releases/2019/statement-of-eric-s-rosengren

It’s a quick and easy read and we recommend it as a way to understand what some feel is the dis-connect between the change in Fed policy and economic reality.  Mr. Rosengren cites the following:

1. The Unemployment Rate is Near 50-Year Lows
2. The Trimmed Mean PCE Inflation Rate is at 2%
3. The U.S. Economy is Growing Somewhat Faster than Potential
4. The Cost of Credit is not Elevated
5. Market Volatility is not Elevated
6. Credit Spreads are not Elevated
7. Stock Prices are Near All-Time Highs
8. Corporate Leverage is Near an All-Time High

However, we believe it’s important to note that some of the indicators Mr. Rosengren flags are backward-looking in nature, in our view.

Of course, since then we’ve gotten more negative new on trade with China, talk of currency wars and a substantial market sell-off.  So, it’s possible they may have to change their tune if sentiment starts to impact the numbers from here.

 

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