The Fed Pivot Is Here

For the past several months I’ve been predicting that the Fed will need to pivot on their interest rate policy. 

As recently as Thursday of last week I predicted that the Fed would have no choice but to drop interest rates based on labor market weakness. I also predicted that we would hear some meaningful update at the Jackson Hole conference in Chair Powell’s remarks on Friday morning. 

I don’t have a crystal ball, although I expect to some that it might seem like I do. On Friday morning Chair Powell did indeed announce a major change in monetary policy. There were a few things that Chair Powell said in his remarks that were significant. 

He declared a bit of a victory lap on the inflation fight, even though the disinflationary progress has been gradual over the past year. 

The real story behind the Fed pivot is unemployment is rising sharply. 

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