One argument for cutting rates by 25 basis points, or 0.25 percentage point, instead of 50 basis points goes like this: The Federal Reserve only makes larger cuts when something is going wrong in the economy or financial system.
And that’s partly true, but it also misses an important point.
Since the Fed began to publicize interest-rate changes in 1994, the central bank has moved from a neutral stance to a cutting stance six times.
The Fed initiated shallow cutting cycles in 1995, 1998, and 2019, each time leading off with a cut of 25 basis points.
The Fed began what would be deeper cutting cycles three times, in early 2001, 2007, and when the Covid-19 pandemic began to spread in March 2020, each time leading with a cut of 50 basis points.
This has led many analysts to conclude that larger cuts of 50 basis points are “reserved” for more severe situations, and there is some truth to this pattern.
Stock markets were sliding as the tech bubble began to deflate with the Fed cut rates in January 2001 by 50 basis points. The bursting of a subprime mortgage-credit bubble in August 2007 preceded the Fed’s cut of the same magnitude in September 2007.
At the same time, Fed officials at both of those meetings still thought their more aggressive action might preempt a downturn, according to the transcripts of those meetings. In other words, just because 50-basis-point cuts look, in retrospect, like actions reserved for the start of a recession, officials didn’t think that way in real time.
Source: WSJ and Federal Reserve
Why cut 50? What is JPOW hiding?
byu/Vrikzar inwallstreetbets
Posted by Vrikzar
25 Comments
JPOW showed he still has the bull in him
Hes a goofy chucking darts like the rest of us. Nothing new
Because the economy is sh*t and he knows it’s about to get worse. Data justified a .25 cut
Maybe the real Jpow are the friends we made along the way… just as regarded
Have you seen the yield curve? It’s been screaming CUT BIGLY for a long while.
Trouble at the banks
https://preview.redd.it/ne0wjrru1mpd1.png?width=672&format=png&auto=webp&s=493c5cf28965a4b34be5c0c420da197648922a20
I mean China and Canada are CTD, real estate is bubbled with massive losses already on the books, tech has been hemorrhaging jobs, consumer sentiment is shitting… it’s not a state secret…
Why? Because they misjudged the correct place to make the initial first cut last meeting and are playing catch up. Have you read the comments? He specifically pointed to a desire to boost the labor market. Important to note the vote was not unanimous with 1 governor saying .5 was too high and supported only .25.
The bond market told us all we needed to know.
3-mo bond collapsed 50 bps in the last month, and the 2-yr signals they were 150 bps behind the curve.
I wonder what the equivalent of WSBers in 2008 were doing since these days everyone is actively involved in stocks, the economy, and interest rates.
It’s self admission that the rate cuts are too late. Remember inflation is transitory. That’s what they said. As soon as they gave out the stimulus money they should have raised the rates. It’s simple economics. There’s gonna be a pull back at some point in 2025 and it’s gonna be nasty. Have some cash ready to buy some blue chip stocks in a possible recession. Could be the best decision of your life.
True, should have cut 100
https://preview.redd.it/hekb9pem8mpd1.jpeg?width=1170&format=pjpg&auto=webp&s=152208781a363f1e78f385259cea001466ac7808
Certainly looks like more than 6 to me.
Why read into anything?
MAYBE they realize they had an insanely quick hiking cycle to prevent long term hyper inflation…and in recognition of that that felt they needed to give a nice big cut just to calm everyone down?
The economy is in the shitter. Companies and the US government have too much debt to keep rates high. Huge looming risks of defaults. Bad news for the economy and the market.
We’ve predicted 20 of the last 0 recessions correctly.
Why does it have to be multiples of .25? Couldn’t just do a .35 cut?
All yall are arguing here and wallstreet is fake pumping and dumping the entire market. Wiping out stop lose. 
Starting to think as a society we overanalyze specific values in order to give ourselves the illusion of control; could be 25 or 50 basis hardly matters to the economy compared violence, childbirth and work ethic but we focus on the former because the latter is too important, too humbling and serious, and would constitute a spiritual breakthrough instead of staying locked in to the triviality of daily life. Jerome Powell, engineering the socioeconomic fantasies of the masses (like all the clergy of history), simply did his duty to maintain our focus on arbitrary values, saving us from confrontation with our mortality and being forced to search through the darkness of life to find our souls
Market data is going to be bad imo. He’s trying to hide the holiday session. Earnings will be down, hires will be down and GDP is going to be revised down.
That’s my guess…
Because its a recession cumin
Why? Why the fuck not? They started hiking with a .50 and now they are staring to cut with a .50. Also, fuck your puts lol
I give it till Christmas. Food stamps, credit cards are maxed, and car camping trending. Yeah.. Winter is coming…
They hiding that fact more company’s filing bankruptcy than in 2020 prime Covid
Am I the only one that still believes the Fed has barely the faintest clue what they’re actually doing?
You all give them too much credit I think.
I mean they have been adjusting job data downwards for past months. Real data is shit and recession is on the table. It was only a week ago where .25 was agreed upon and it was changed to .5 over the weekend. Yea…. There are some dirty laundries that’s about to come out.