Powell reverses the burden of proof

Yesterday, the Fed cut its policy rates for the third time in a row and entered a new phase of the monetary easing cycle. In recent months, it could justify lowering rates by the desire to make its policy less restrictive and, in doing so, to avoid a sharp rise in unemployment. Priority was given to preserving the labour market. From now on, the reduction of policy rates is no longer a matter of course, it must be demonstrated that inflation is making further progress on its way to target– which partly depends on the actions of the future administration. The FOMC halved its rate cut projections for 2025. This correction, logical given the recent comments from the Fed, took the markets by surprise nonetheless.