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Illustration: Aïda Amer/Axios

When Fed chair Jerome Powell said Tuesday that the Fed would "act as appropriate to sustain the expansion" traders took it as the latest confirmation of the Powell put — the notion that Powell and the Fed are prepared to lower interest rates and stimulate the economy if stock prices fall too far.

Between the lines: In a strong economy like we've got now a few interest rate cuts are likely enough to keep confidence high and business activity chugging. But Friday's jobs numbers, coupled with last week's PMI readings show that things may be starting to turn.

  • Add to that the growing likelihood of recessions in Europe and Japan and the fact that policymakers there have little ammo left to fight one.
  • And U.S. interest rates are barely above the rate of inflation.

This could be a problem that 50 basis points of interest rate cuts (or even 75) isn't going to solve.

What they're saying: "The market overestimates the power of central banks and stimulus," Zhiwei Ren, managing director and portfolio manager at Penn Mutual, told Axios in March.

The problem with the economy today isn't on the supply side, Ren said. The market isn't lacking liquidity and businesses broadly aren't having trouble obtaining credit — those are the issues monetary policy is designed to tackle. The problem today is on the demand side.

  • Central banks "can pump as much money as they want but liquidity isn't flowing into the real economy," Ren added. "No matter how much credit you provide, if nobody comes to borrow that's a liquidity trap."

On the positive side: The U.S. has at least built in some breathing room by raising rates from zero, beginning in 2015, and reducing the value of the Fed's bond holdings from a record $4.5 trillion.

But, but, but: The Fed continues to purchase trillions in U.S. Treasuries and mortgage-backed securities.

  • And while the impact of the Trump tax cut and spending increases is expected to fade this year, the U.S. government is still taking in far less revenue and spending far more than it historically has — another form of stimulus the market is already receiving.

The bottom line: We're in year 11 of the monetary easing experiment and it's become pretty clear the goal of weaning the economy off its free money medicine isn't working as planned.

  • One has to wonder if a Powell put is really something the market should be excited about.

Our thought bubble, from Axios' business managing editor Jennifer Kingson: "It's interesting that the markets all move with Pavlovian predictability in response to these various indicators, when there's no longer such strong evidence that cause leads to effect the way it once did, or, at least, the way it was once seen to have done. And the power of the levers Powell wields would seem to be quite depleted."

Go deeper

Advocates fret Roe v. Wade's 49th anniversary could be its last

Photo: Leigh Vogel/Getty Images for Women's March Inc

As Saturday marks the 49th anniversary of Roe v. Wade, the Supreme Court's landmark decision that legalized abortion access in the U.S., advocates warn the ruling is "more at risk now than ever."

The big picture: The Supreme Court in December heard a challenge to a Mississippi 15-week abortion ban that could throw Roe's survival into question, or at least narrow its scope.

Updated 11 hours ago - Politics & Policy

Omicron dashboard

Illustration: Brendan Lynch/Axios

  1. Health: Pfizer and Moderna boosters overwhelmingly prevent Omicron hospitalizations, CDC finds — Omicron pushes COVID deaths toward 2,000 per day — The pandemic-proof health care giant.
  2. Vaccines: The case for Operation Warp Speed 2.0 — Starbucks drops worker vaccine or test requirement after SCOTUS ruling — Kids' COVID vaccination rates are particularly low in rural America.
  3. Politics: Biden concedes U.S. should have done more testing — Arizona says it "will not be intimidated" by Biden on anti-mask school policies — Federal judge blocks Biden's vaccine mandate for federal workers.
  4. World: American Airlines flight to London forced to turn around over mask dispute — WHO: COVID health emergency could end this year — Greece imposes vaccine mandate for people 60 and older — Austria approves COVID vaccine mandate for adults.
  5. Variant tracker

Arizona governor sues Biden administration over COVID funds tied to mandates

A teacher prepares a hallway barrier to help students maintain social distancing at John B. Wright Elementary School in Tucson, Arizona, on Aug. 14, 2020. Photo: Cheney Orr/Bloomberg via Getty Images

Arizona Gov. Doug Ducey (R) filed a lawsuit Friday against the Biden administration for ordering the state to stop allocating federal COVID relief funds to schools that don't comply with public health recommendations such as masking, the Arizona Republic reports.

Why it matters: The Treasury Department said last week that the state would have to pay back the money if Ducey does not redesignate the $173 million programs to ensure they don't "undermine efforts to stop the spread of COVID-19."