The Fed targets the one year, not the PCE

What was the Fed thinking while adding three rates cuts?

PCE was stable enough, hardly changed. But the first drop in the one year scared the Fed and they lowered.

Then something new happened. They knew they were caught. The Fed and the market began competing a bit and the one year managed to line up exactly with the cuts.  This is the first time that happened since the Nixon Shock. The Fed is effectively hedged good news in my opinion.

The drop in rates happened when global trade slowed and we went from nearly 3% growth to slightly below 2% today.  The Fed cannot measure real GDP in run time, but bouncing off the one year is a pretty good representation of the economy for this central banker given the dollar usage we have.

When we force the Fed to remain withing its uncertainty bounds then the spotlight turns to the Senators versus the primary dealers.  The one year rate really measures the ability of the senators to do cash management rather than the primary dealers.  We will see this whole thing operating as a tax, and when the Fed is hedged that means Congress does not get that seigniorage surge is normally gets waiting for the primary dealers to react. When seigniorage turns into white noise then the Senators need to do some cash management themselves.