Critical challenge is: Not letting things turn into something worse
If you look at the Beige Book, you can’t look at it as exciting, if anything it was a fair bit downbeat
It suggests there are warning signs on the economy
You only want rates to be this high as long as you have to
We will get a new dot plot, there has been consensus for inflation to come down but not as fast as it’s been coming down
In the dot plot, unemployment was expected to rise but not this fast
What’s most important isn’t the next meeting, it’s getting it right over several meetings
Inflation is on the path to 2% and we now need for labor market and GDP to stabilize
Danger signs are when you see things starting to get worse
The current employment average is too low for population growth
I worry the percentage chance of a recession might be rising
We have a little more tolerance for an upside surprise on CPI as the longer arc shows inflation coming down

Those comments on the dot plot came after a question about more-aggressive easing. So between the lines that was an argument for 50 bps. At the same point, he emphasized that larger cuts were also a question for future meetings.

Fed funds futures pricing is down to 25% for 50 bps.

This article was written by Adam Button at www.forexlive.com.