via ToastTheCorgi
Everyone piling into “September rate cut” bets is ignoring the actual data and listening to wishful thinking. The Fed isn’t going to hand out a cut just because markets want it.
The labor market is still holding up. Sure, unemployment has ticked up a little, but it’s nowhere near a collapse. Powell has already said they’ll tolerate some labor pain before even thinking about easing. If you’re waiting for the Fed to rescue every weak jobs print, you’re not paying attention.
Inflation is still too high. Core PCE is hovering above 2.5 percent and closer to 2.7 or 2.8. That’s not a victory lap. That’s exactly the range where Powell has said he doesn’t have “confidence” inflation is under control. Cutting now would risk reigniting it and blowing up the last two years of progress.
Powell is not a dove. Every time markets get ahead of themselves, he slaps them down. Jackson Hole is coming up, and if history tells us anything, he’ll remind everyone that the Fed is data dependent, not market dependent. Translation: he doesn’t care about your bets.
Credibility is everything right now. Cutting while inflation is still running hot and the jobs market is still functioning would make the Fed look weak. They’d rather be accused of holding too long than cutting too early and losing control.
History backs this up. The Fed doesn’t pivot on one or two soft jobs reports. Policy lags mean hikes are still filtering through. They know it. That’s why they’ll hold.
Bottom line: There’s no cut in September. Unless we suddenly get a jobs collapse and inflation magically melts away, the Fed is staying put. Markets want it, politicians want it, but Powell isn’t going to give it.