{E} conomic-policy decisions can happen for political reasons, or for economic ones. Politically motivated choices are almost never identified as such by their advocates, but when policy-makers signal policies that have little or no economic merit, then politics is always the reason why.

This observation should make those who correctly believe that central-bank independence is crucial to long-run economic stability very nervous in the United States right now. The current futures price suggests that the main policy rate for the Fed will be a whopping 1.5 percent below today’s rate by year-end. After a pause at the next meeting, the market expects steady rate cuts between March and the November election.

There are two main reasons why such a sequence of events could be economically defensible. If the market showed signs of entering a recession, then, of course, the Fed should start cutting rates. The problem for this explanation is that the economy is not in any way signaling that it is headed in the near term toward recession — indeed, the opposite. The jobs-market data have continued to be solid, with an above-consensus 216,000 jobs added in December, with the unemployment rate holding steady at 3.7 percent. When the Fed began raising rates because the economy was hot in December 2018, the unemployment rate, by comparison, was 3.9 percent. The jobs data have continued to be strong in January, with initial claims for unemployment insurance about as low as they get and far below where they were when the Fed tightened in 2018.

With strong jobs data, consumers have been bingeing. Retail sales in December surprised Wall Streeters dramatically on the upside, and the Atlanta Fed’s GDPNOW is showing economic growth in the fourth quarter of last year of a healthy 2.4 percent.

The other reason why the rate cuts priced into market might make sense is if inflationary pressures dropped so much that a deflationary spiral appeared possible. But this, too, is radically inconsistent with the incoming data. Inflation appears to be accelerating again, just as it did in the 1970s when the Fed, like now, declared victory too early over inflation.

There are lots of different ways to measure inflation, but the Fed made news last year when it signaled that its preferred measure was something called “supercore inflation,” which tracks services excluding energy and housing. But look at what supercore is telling us. The increase over the past twelve months was 3.9 percent. Over the past six months, this increased to 4.6 percent. If we take the latest month, December, and annualize it, then the rate of increase is 4.9 percent.

This acceleration is visible in the top-line number as well, with the twelve-month change in overall inflation climbing from 3.1 percent in November to 3.4 percent in December, and “core” inflation continuing to hover around 4 percent.

Given these numbers, no central bank in its right mind could possibly be thinking about cutting interest rates, but that is what the markets are sure the Fed will start to do. How sure? The odds of the policy rate being where it is today in May are only 13 percent.

So what is the market thinking? It might be that a sharp turnaround in the economic numbers could happen, but it is anything but certain, which is what a rate cut by May appears to be. My own bet is that the odds of a drop sharp enough to justify rate reduction are probably in the 10 percent range, not 90 percent. Which brings us back to the main point: If economics cannot explain a policy change, then politics may.

On this, the market may have a point. While Jay Powell, a man of courage and character, was nominated by President Trump, the majority of bank presidents and governors are now Democrats. And the staff that gives the Fed the outlook that they base their decisions on is profoundly left-leaning, with 97 percent of their political contributions going to Democrats in the last presidential cycle. Might the staff push a recession narrative that moves the Fed to juice up the economy in an election year? Of course.

In this day and age, losing our institutions to woke partisans seems par for the course, and markets appear to have decided that the Fed is lost as well. If the data stay where they are, and the Fed starts cutting rates, then we will all have to agree with them. My bet is that the markets are wrong, but we shall see.