One month ago, BofA CIO Michael Hartnett was just as shocked as everyone else, when Powell unexpectedly pivoted, ending the Fed's tightening campaign (despite saying just two weeks prior that it was "premature" to even speculate on rate cuts), even though inflation remained above the unemployment rate. As Hartnett said at the time, "on only 5 occasions in the past 90 years has the Fed cut rates when core CPI (now 4.0%) was higher than the unemployment rate (3.7%). Of those five occasions, the cuts were triggered by war once (Oct'42) and a recession four times (Oct'69, Aug'74, May'80, Jul'81)."
This one is neither, suggesting one of three things: 1) war is about to break out; 2) the economy is in far worse shape than the Biden administration will dare to admit (spoiler alert: it is), or 3) the political Fed is indeed gaming the monetary policy to prevent a recession in an election year.
