Best Be Silent. . .

(Best Be Silent. . .)

The total of this oft used phrase is: "Best be silent and believed a fool than speak and remove all doubt." Fed Chairman Powell, when discussing prospective rate cuts for next year indicated the probability of two cuts rather than the anticipated four. The Market reacted violently to the news, the Dow shedding more than a thousand points and the other Indices sold off just as badly.

Powell had been installed as Federal Reserve Chairman in his first Administration. When the American economy, the Chairman took it upon himself to all but unliterally raise interest rates. Markets sold off on that occasion and Trump had expressed his dis-pleasure. However, when Joe Biden came into Office, and his policies that could not help but cause inflation to rise, the peak at 9+%, Powell was forced into a position where he would have to aggressively raise rates to combat the effect.

What goes up must come down and inflation has re-treated, to a point, and such progress in rate reduction has conducive to economic condition and Market viability. That makes Wall Street responsive to interest rates and when the Chairman states that only two reductions are forthcoming, the reaction could be negative, as it was yesterday.

The Federal Reserve, and the Biden Administration over-all, mis-managed the economy and was never able to definitively determine the proper approach to interest rates. A month or so ago, the Fed cut interest rates a half point. Speaking of over-priming the pump. That cut threw off the calibration so all Fed action since has been hap-hazard and further cuts at this stage could be redundant.

Not knowing where to stop and inflation is still above the Fed target of 2% has yet to be achieved, cutting at all would seem counter-productive. There is talk of a "soft landing" for the economy but as one keeps injecting liquidity, the potential exists to re-ignite inflation all over again. If this were the case, making any cut, big or small, would be self-defeating.

Powell's sin from yesterday was suggesting that two cuts would suffice for next year rather than four. The Fed Chairman has never been a clear voice, always giving vague responses at Federal Open Market Committee meetings as to what direction the Fed might take. However, if Powell cannot be clear and only confuses investors, bloodbaths like from yesterday will continue.

First, do no harm.