The Federal Reserve held its key interest rate steady last week and hinted at the possibility of a rate cut in September.
What happened next seemed straight out of a poorly written movie script. Softer-than-expected economic data began to pour in, as if to admonish Fed officials for not acting sooner to lower the Fed funds rate. The prophets of doom and charlatans of gloom did not waste any time, emerging with claims that the economy, which was growing at 2.5% due mostly to strong consumer spending, was on the brink of a calamitous economic downturn. Fear began to set in. Stocks and treasury yields plummeted as financial market participants became convinced that central bankers had made a grave policy error and that the Fed was once again behind the curve.
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