What a difference seven months makes. At the end of November 2018, financial markets priced the Fed funds rate (then 2.2%) to end 2020 at about 2.7%. Now, however, the market expects the rate to end 2020 at about 1.5%. The pricing of three cuts in the second half of 2019 and a further one or two in 2020 is aggressive, and yet, as I’ll explore below, the easings will probably fail provide substantial support to the economy, especially so late in the cycle. Instead, I predict that it will fuel financial excess, reduce policy options during a downturn, and ultimately question the credibility of the Fed…
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