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.
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:
- The Unemployment Rate is Near 50-Year Lows
- The Trimmed Mean PCE Inflation Rate is at 2%
- The U.S. Economy is Growing Somewhat Faster than Potential
- The Cost of Credit is not Elevated
- Market Volatility is not Elevated
- Credit Spreads are not Elevated
- Stock Prices are Near All-Time Highs
- 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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