The Standard & Poor’s 500 Index is off to its best start in 20 years.
Despite the exceptional performance of U.S. stock markets year-to-date, and data that suggest economic growth remains steady, some analysts and investors have been pecking at Federal Reserve Chair Jerome Powell. They’re keen for the Fed to implement a rate cut, which could stimulate economic growth and help push stock markets higher, because inflation is lower than ideal, reported Howard Schneider and Ann Saphir of Reuters.
Recent data suggest core inflation is at 1.6 percent. That’s below the Fed’s target rate of 2 percent. Fed leaders have said they think low inflation may be temporary. Until a trend has been established to their satisfaction, they intend to do nothing. The Reuters article explained, “…preemptive…rate moves in either
direction appear off the table for now, absent some unexpected event that raises new risks or shocks the economy into a higher or lower gear.”
Second-guessing the Fed is not new. In 1955, the ninth Chairman of the Federal Reserve, William McChesney Martin, offered this insight to the Fed’s work:
“Those who have the task of making [credit and monetary] policy don't expect you to applaud. The Federal Reserve…is in the position of the chaperone who has ordered the punch bowl removed just when the party was really warming up.”
On Friday, jobs data suggested U.S. economic growth continues apace. The Bureau of Labor Statistics report showed unemployment was at a 49-year low. The news made investors happy, and the Nasdaq Composite and S&P 500 finished the week higher.
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Weekly Commentary for May 6, 2019
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