Did the Fed just go Minority Report?
Author: Janelle E. Woodward, CFA, Head, U.S. Fixed Income, BMO Global Asset Management
As the market debates whether the recent Fed action is a mid-cycle adjustment or an easing cycle, we examine what we believe constitutes a more significant shift from a counter-cyclical to a pro-cyclical policy. Is the Fed now in the business of predicting the future? This approach reminds us of the 2002 film, Minority Report, in which the police attempt to eliminate murders by anticipating crimes and arresting the individuals before they commit them. The movie centers on the limits of such predictions and the Pandora's box opened by attempting to foresee and change the future. What if this shift in the Fed's policy doesn't work? Or more concerning, what if it does?