What Is Powell Thinking?

This question was partially answered yesterday in a speech by Fed Governor Christopher Waller: "This cycle, however, with economic activity and labor markets in good shape and inflation coming down gradually to 2 percent, I see no reason to move as quickly or cut as rapidly as in the past. The healthy state of the economy provides the flexibility to lower the (nominal) policy rate to keep the real policy rate at an appropriate level of tightness."

This suggests that Fed Chair Jerome Powell and his colleagues are still thinking about three rate cuts of 25bps each this year, but are in no rush to start cutting. Today's news supports a more cautious approach to rate cutting: