The Federal Reserve began a new easing cycle this week by cutting the federal funds rate by a half percentage point at the Federal Open Market Committee meeting. Market participants took the news in stride, as they had expected the Fed to cut rates by that amount rather than by a quarter point.

At the press conference following the meeting, Fed Chair Jerome Powell indicated the action reflected growing confidence that the Fed’s 2 percent inflation target was within sight, while the labor market had cooled in the last three months. As a result, the balance between the risk of inflation and unemployment had shifted in favor of ensuring that the job market would not deteriorate materially.

The main unknown now is what the future path of easing will look like. According to John Authers of Bloomberg, some of the steam from the 50 basis point rate cut dissipated when Powell doused expectations for additional large cuts to follow. He indicated that people should not assume that this is the pace of what future rate cuts might be, considering that the economy is in good shape.

The median projections now call for the Fed funds rate to decline to about 3.25-3.5 percent by the end of next year, which is close to the 3 percent rate the bond market was pricing in. If so, it would be the first........

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