Economic Outlook: Who Wins the Fed vs. Financial Markets?

Economists and market commentators across the board expect the Federal Reserve to lower interest rates by 25 basis points on December 18, yet it’s difficult to decipher whether recent economic data justify the move. 

“With both sides of the Fed’s dual mandate (stable prices and full employment) heating up, it’s increasingly likely that the Fed has cut the federal funds rate by too much, too soon,” said Yardeni’s chief markets strategist Eric Wallerstein. 

Broadly speaking, the central bank lowers interest rates to stimulate the economy during periods of sluggish spending and weak economic activity. Conversely, when consumer spending ramps up and inflation accelerates, the Fed raises rates to curb excessive price growth.