The Fed is about to cut rates to protect the economy, even though most signs are strong

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The Fed is about to cut rates to protect the economy, even though most signs are strong
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The Fed is expected to cut rates by a quarter point this week, in a preventative move aimed at limiting the impact of trade wars and slower global growth on the U.S. economy.

In the last several weeks, as the Fed meeting edged closer, economic data began to show signs of improvement from a soft patch this winter and spring. Consumers, who comprise 70% of the economy, strengthened in the second quarter, with consumption up 4.3%, its best reading since the fourth quarter of 2017.

The Fed "will signal they're' going to go on if conditions warrant it. It's clear the chairman and his cohorts are not looking at incoming data in the sense that they are data dependent. They made it clear they want to inoculate the economy," Krosby said. Stephen Stanley, chief economist at Amherst Pierpoint, said he expects the Fed to cut rates just once and then stop.

"They're not going to say that we're done. I think it would be too much of a leap for the market. My sense is they'll leave the door open, but their aim is not going to be locked in for the next meeting. It's clearly a function of how the data play out," Stanley said. "I'm just more optimistic than they are about the how things are going to evolve."to China for the first round of face to face talks since May.

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