No, the Fed Doesn't Need to Reduce Rates, but...

Stocks had another nice day Wednesday, with the S&P 500 gaining 0.8% in price terms on the heels of Tuesday's 2.1% rise.[i] Headlines near universally credited the Fed, citing Chair Jerome Powell's jawboning about rate cuts and pledging not to sit idle if tariffs start taking a toll. On the whole, this strikes us as an overreaction and another example of investors having far too much faith in the Fed's ability to manipulate US growth rates. If policymakers could control the economy by pushing this button or pulling that lever, the Fed probably wouldn't be struggling to hit its self-imposed inflation target amid the slowest economic expansion in history. Moreover, as we wrote last week, there is scant (if any) evidence the economy needs Fed intervention. Yet it could be a salve for sentiment, perhaps helping investors move on from 2019's false fears.