MARKET CALL: Powell's Latest Pirouette

Fed Chair Jerome Powell is an accomplished danseur. His pirouette's are masterful. He did another such pivot on Friday in prepared remarks for a speech [starts at 19:00] to business leaders in Dallas. He said that, "the economy is not sending any signals that we need to be in a hurry to lower rates." That's what we've been saying since Powell & Co. started the Fed's latest monetary easing dance on September 18, when they cut the federal funds rate (FFR) by 50bps, which we believed was too much too soon.

They did it again on November 7, cutting the FFR b y 25bps. But now, Powell is pushing back against market expectations of more rate cuts any time soon. Just last Thursday, at his presser, he claimed that the FFR was still too restrictive and had to be lowered to the neutral FFR. Most Fed officials may still believe that, but they may no longer be in a hurry to do so. So it might be none-and-done at the December 17-18 FOMC meeting. Meanwhile, our new "Nirvana Model" shows that both the unemployment rate and inflation rates suggest that the current FFR is at the neutral rate (chart).