As the Fed Angles for a Soft Landing, Expect a 'Dovish Hold’
Policy makers aren’t inclined to cut rates again, barring a fresh downturn in activity. But don’t expect a reversal anytime soon, either.
Jerome Powell has reason to smile as he takes to the lectern this week.
Photographer: Andrew Harrer/BloombergWith the economy continuing to defy predictions of recession, the Federal Reserve has good reason to take a victory lap at this week’s policy meeting. The latest jobs report adds to the evidence that after a rocky end to last year, the central bank’s dovish pivot positioned the economy to achieve the fabled “soft landing.”
Last December, the Fed hiked rates for the fourth time in 2018 despite very obvious turmoil in financial markets and growing signs of decelerating economic activity. If the rate hike itself was, charitably speaking, ill-advised, the accompanying forecasts announcing the expectation of further rate hikes in 2019 were completely out of touch with reality. Fed Chair Jerome Powell, however, quickly pivoted in response to the growing market gloom, saying just a few weeks after the December rate hike that the Fed “will be prepared to adjust policy quickly and flexibly and to use all of our tools to support the economy” as deemed necessary.