Dollar Debasement Realities

Dollar Debasement Realities

This week, as widely anticipated, the Federal Reserve cut its benchmark interest rate by 25 basis points, marking a decision that carried a 97% probability heading into the announcement. Despite the mechanical predictability of the rate reduction, market reactions were anything but calm. Equities registered their largest post-Fed selloff since March 2020, erasing $1.8 trillion in market capitalization.

The decline was not triggered by the cut itself, but by Chair Jerome Powell’s unexpectedly hawkish tone and revised projections: the Fed’s 2025 rate path narrowed from three cuts to two, and its long-run inflation outlook was lifted. Such changes underscore that inflation, once again, has not been fully subdued, necessitating more restrictive policy for longer.