The market’s continued focus on information suggesting a shift toward a more accommodative monetary policy, paired with its tendency to overreact to any hint of such easing, spawns a self-perpetuating cycle that poses a complex challenge for policymakers. This cycle unfolds as follows: anticipated lower rates drive up asset markets, increased wealth and spending fuel higher inflation, and the combination necessitates higher interest rates for longer. The market reacts to various sources of information, including scheduled economic data releases. For example, Friday’s release of a softer-than-expected jobs report ... (full story)