Strategas Insight: One Policy Error Waiting on Another

The market has long been (rightly) accused of testing each new Federal Reserve chair. Jay Powell’s first 18 months on the job have been no different. Out of the gate, the Powell Fed effectively continued the course of quantitative tightening and federal funds rate hikes that had begun under his predecessor, Janet Yellen. But by September of last year, after just seven months on the job, Chairman Powell’s suggestion that Fed policy was “a long ways from neutral," combined with advertising an additional hike in 2018 (which occurred in December), proposing as many as three hikes in 2019 and the potential for more in 2020, and increasingly hostile rhetoric on the trade front from the Administration—proved too much.

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