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The Federal Reserve implemented a 25 basis point rate cut Wednesday afternoon, sending stock markets (^DJI, ^IXIC, ^GSPC) lower. Roth Capital Partners chief economist & macro strategist Michael Darda joins Market Domination to provide insights into the central bank's decision.
Darda says the rate cut was "expected" but notes the updated dot plot projections contained a hawkish tone. He anticipates a "multi-month pause" in rate cuts, citing Federal Reserve Chair Powell's indication that the economy is outperforming initial expectations from September.
"What's really strange about the current backdrop is ... the labor market is cooling," Darda explains. He highlights that private employment growth is at "half the level that we were seeing pre-pandemic," and the unemployment rate showed early recessionary signals by "hooking upwards" during the summer.
Despite this, Darda notes that overall, economic growth remains robust, with fourth quarter GDP tracking estimates in the 3% range. "People look at that, and they look at the stock market ... and they kind of scratch their head thinking, 'what is the sense of urgency here? Why is the Fed doing 100 basis points of cuts when everything seems to be fine?'" Darda tells Yahoo Finance.
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This post was written by Angel Smith