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How baseball's new quant strategies could inform the Fed's next rate-cut call

Added 06-10-19 07:02:01am EST - “The Fed seems to be contemplating a pre-emptive easing move, or using its most potent weapon earlier in the "game."” - Cnbc.com


Posted By TheNewsCommenter: From Cnbc.com: “How baseball's new quant strategies could inform the Fed's next rate-cut call”. Below is an excerpt from the article.

If Jerome Powell moves to cut interest rates by midsummer as the market now projects, the Federal Reserve chair will be like a baseball manager calling for his best relief pitcher in the seventh inning to keep the game from getting out of hand rather than waiting until the ninth to close out a win.

As it happens, this is exactly the action today's analytically rigorous baseball wisdom advises — but runs counter to the typical conventions of the past few decades and the preferences and biases of many team managers.

Likewise, if the Fed were to shift from a steady tightening campaign to easing policy within eight months, before clear signs of pronounced economic weakness and without a chance to telegraph a smooth transition, it would mean Powell using his most potent weapon — an initial rate cut after a series of hikes — earlier than he'd planned or hoped, and before the Fed has typically done so in recent decades.

Since the 1980s, the job of a baseball "closer" was to seal a win by finishing a game his team was leading. Often this meant entering at the start of the ninth inning, with no runners on base and no threat underway, to earn a "save" — a statistic that brought closers enormous status and salaries.

This stat not only measured a reliever's value but dictated how closers were used: If a save was granted for finishing a game his team led by three runs or fewer (and under certain other circumstances) then the closer's role was defined as to appear only in "save situations."


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