Powell's Mixed Message Remains Dovish

The Federal Open Market Committee (FOMC) cut the federal funds rate (FFR) by 25bps today as widely expected. We expected it as well, though we still believe that the now 75bps cut in the FFR since September 18 is too much, too soon because both the economy and the labor market remain strong. In his press conference today, Fed Chair Jerome Powell acknowledged several times that both remain solid. He said that they are "in a good place."

Nevertheless, he stated a few times that he and his colleagues on the FOMC believe that monetary policy remains restrictive since the FFR is still above its mystical "neutral" level. He did not explain, nor did any reporter ask him to explain, how they know that monetary policy is restrictive if the economy is doing so well, when he also said that economic growth could be even stronger next year!