Easing begins with a big splash — and a consumer vibe shift could be coming

Better safe than sorry?... The Fed boldly kicked off its easing cycle, serving up a 50-basis-point rate cut. But Chair Jerome Powell cautioned against expecting more jumbo slashes. At the central bank’s remaining meetings this year, monetary policymakers expect to cut 50 more basis points combined if the economy unfolds as anticipated. So why’d the Fed go big this week?

• Stressin’ about the labor market: The median monetary policymaker thinks that unemployment (now at 4.2%) will be at 4.4% at the end of this year and next, worse than previously expected.

• Stressing less about inflation: “The Committee has gained greater confidence that inflation is moving sustainably toward 2 percent,” the Fed said.

All you need is confidence… and Americans don’t have much of it right now (not great since consumer spending = two-thirds of the US economy). While consumer sentiment perked up last month, it’s still at historically weak levels. But with inflation and rates finally starting to come down, a vibe shift may be in the cards.

• Gas prices and stock prices play a key role in how Americans feel about the economy and their finances (aka “consumer sentiment”). Gas prices have been coming down and stocks have been going up, which should bode well for sentiment (the next report arrives on Tuesday).

• Another bright spot: US retail sales unexpectedly rose last month, fueled by online shopping strength.