For the past several months I’ve been predicting that the Fed will need to pivot on their interest rate policy.

As recently as Thursday of last week I predicted that the Fed would have no choice but to drop interest rates based on labor market weakness. I also predicted that we would hear some meaningful update at the Jackson Hole conference in Chair Powell’s remarks on Friday morning.

I don’t have a crystal ball, although I expect to some that it might seem like I do. On Friday morning Chair Powell did indeed announce a major change in monetary policy. There were a few things that Chair Powell said in his remarks that were significant.

He declared a bit of a victory lap on the inflation fight, even though the disinflationary progress has been gradual over the past year.

The real story behind the Fed pivot is unemployment is rising sharply.

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