Based off her comments and what we have seen happen in the EU I think she hit the nail on the head. When Europe started cutting rates they had to deal with inflation rebounding and pretty mixed numbers for a while before it all settled down. Given that the US is about to go into elections and how big the cut was if this does kick off a month or two of inflation it could dramatically change the outcome of the elections.
The concerns that she listed are also ones that I agree with and easily see as huge issues going forward as well.
that the big move would indicate that Fed officials see “some fragility or greater downside risks to the economy”; that markets might expect a series of large cuts; that large amounts of sideline cash could be put to work as rates fall, stoking inflation; and her general feeling that rates won’t need to come down as much as her fellow policymakers have indicated.
Once the cut was made people already began thinking that we would get another 50 basis point cut before the end of the year and cutting the rate by 100 basis points in 3 months would be a huge sign that the US is in enormous economic trouble and the idea of a soft landing is dead we are headfirst crashing into the ground.
