The Fed Is Flying Blind. Investors Don’t Seem to Care

The basic question is whether half-percentage-point cuts are the new normal.

Fed policymakers say not

But who cares what they say? Markets got into the that there’s a decent chance that half a point is the new quarter point. 

Much of what matters when assessing how the Fed will react to any given economic development is where it thinks rates will eventually land in a balanced economy—what economists call the neutral rate, or r-star. 

Unfortunately policymakers are showing their confusion about where it lies, with their estimates ranging from 2.4% to 3.8%, and much higher than before the pandemic.

James Mackintosh Wall Street Journal 22 September 2024

https://www.wsj.com/finance/investing/the-fed-is-flying-blind-investors-dont-seem-to-care-16b77931