By John Crudele
May 29, 2019 | 10:10pm | Updated
The financial markets really, really want the Federal Reserve to cut interest rates this year. So much so, in fact, that the markets have already pretty much made the cut for the Fed.
Yesterday, for instance, the yield on the three-month government bill topped the yield on the 10-year note by the most since the 2008 financial crisis. Yields aren’t supposed to invert like that — the shorter securities are supposed to pay less than the longer ones.
When inversion happens, the financial community figures that the Fed has no choice but to bring down rates on the short-term securities it controls.
But it was a bit troubling for Wall Street when the Fed last week indicated that it wasn’t thinking in that direction.
There are at least two things that people are missing that could be causing the Fed to balk at cutting rates.
One, is that the direction of the economy isn’t certain right now.
While industrial production, retail sales, durable goods orders and a number of economic surveys have weakened recently, the most important figure of all, employment, remains very strong.
And another monthly labor number comes out next week. If employment in May was also strong — like I think it will be — then the Fed may be even more hesitant to give the financial markets what they want.
The second reason why the Fed may be hesitating is political.