, Columnist
Is the Market Overreacting or Is the Fed Underreacting?
Markets tend to be better than economists at predicting recessions.
Pay attention, Chairman Powell.
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In his press conference this week, Chairman Jerome Powell emphasized that while the Federal Reserve takes financial conditions into account when setting policy, they are only one of many factors it considers. The markets were not pleased. Trending higher before the Fed announcement, they cratered halfway through the press conference and have continued to fall.
Do the markets know something that the Fed doesn’t? Or is this an overreaction, as Treasury Secretary Steven Mnuchin says? As a two-handed economist, my answers are: Yes and no, respectively.