All eyes are on the FOMC meeting and rate decision in an hour.  I think there will a be 25 basis point cut but wouldn’t be surprised if its 50 basis points.  That said, here are the three big mistakes under Jay Powell and somehow, he must address each of these through actions and words today.  Most important when he’s asked if low inflation is still transitory his answer should be “not anymore.”

Jerome “Jay” Powell Big Three Mistakes

1. October 3, 2018 “Long way from neutral”

Powell says we’re ‘a long way’ from neutral on interest rates, indicating more hikes are coming

In a question-and-answer session Wednesday with Judy Woodruff of PBS, Powell said the Fed no longer needs the policies that were in place that pulled the economy out of the financial crisis malaise.

“The really extremely accommodative low interest rates that we needed when the economy was quite weak, we don’t need those anymore. They’re not appropriate anymore,” Powell said.

“Interest rates are still accommodative, but we’re gradually moving to a place where they will be neutral,” he added. “We may go past neutral, but we’re a long way from neutral at this point, probably.”

2. December 19, 2018 “Fed hikes rates fourth time in 2019, seven since election of Trump”

The Dow Jones Industrial Average was in freefall by the time the Fed hiked rates, and it came very close to pushing the nation into recession. 

• 23,675 Dec 18, 2018
• 21,792 Dec 24, 2018

3. Low Inflation “Transitory”

Justifying miscues on the notion the “data” was temporary (lost lots of credibility since the promise was to react to data, not rationalize it to avoid criticism of policy actions).

The key today is for Jay Powell to swallow his pride, admit mistakes and bring back Fed credibility.