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>> The market is expecting the Fed to start cutting interest rates... However: > Just about every time the Fed started CUTTING rates dating back to 1950, the

• disgruntledphd2 3y ago
  Yeah, because the Fed have a dual mandate so when employment decreases, they loosen financial conditions.
  • politician 3y ago
    The "dual mandate" was established by the Federal Reserve Reform Act of 1977, whereas the data shows this phenomenon goes back over 20 years earlier. How then could the dual mandate be the cause of the effect?
    • nostrademons 3y ago
      They had an informal dual mandate to maximize employment and minimize inflation before then, but the purpose of the Federal Reserve as created was to preserve financial stability, avoid financial panics, and maximize employment. In other words, they had half of the dual mandate, the half that involved injecting money when times were bad to stabilize the system. The government codified the inflation mandate in response to the 1970s inflation. The phenomena of dropping rates when a recession is impending is congruent with the "maximize employment" portion of their mandate, which predated 1977. Indeed, their failure to do this in 1929-1930 led to the Great Depression. Ben Bernanke's pre-Fed-chair academic career was devoted to studying that.
• mullingitover 3y ago
  I think this is a “skate where the puck is going” situation. The fed sees things trending toward recession before it arrives and starts cutting, but the recession happens before the rate cuts have any effects on employment.