The Fed seems to be contemplating a pre-emptive easing move, or using its most potent weapon earlier in the 'game.'
If Jerome Powell moves to cut interest rates by midsummer as the market now projects, the Federal Reserve chair will be like a baseball manager calling for his best relief pitcher in the seventh inning to keep the game from getting out of hand rather than waiting until the ninth to close out a win.
Josh Hader #71 of the Milwaukee Brewers pitches in the eighth inning of the game against the Los Angeles Dodgers at Dodger Stadium on April 12, 2019 in Los Angeles.Since the 1980s, the job of a baseball "closer" was to seal a win by finishing a game his team was leading. Often this meant entering at the start of the ninth inning, with no runners on base and no threat underway, to earn a "save" — a statistic that brought closers enormous status and salaries.
Teams are listening. Josh Hader is the first-place Milwaukee Brewers' most dominant reliever, but fully one-third of his appearances this year have been in non-save situations. Wall Street economists have rushed to match the market's message with forecasts of cuts. Barclays now sees three-quarters of a percentage point in cuts by December. Former Treasury Secretary Larry Summers argued for a half-point easing move as a kind of insurance policy against a downturn.
The trade-war headwinds are both serious — and potentially temporary. If the Fed were to ease in July and then a deal is struck with China to remove all tariffs, perhaps the economy would reaccelerate, markets would celebrate and make it seem as if Powell wasted his best arm to defuse a flimsy threat in an easy win — and now may have lost that option for a tougher game tomorrow.
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