Tariffs could be the Fed’s excuse to cut interest rates – Fixie News

Tariffs could be the Fed’s excuse to cut interest rates

The Federal Reserve needs an excuse to cut rates at its next meeting, and it will point to the tariffs as an impetus to cut.

But let’s call it what it really is. The Fed raised rates too quickly late last year, and now needs to adjust accordingly.

As rate hikes tend to act with a six-month to nine-month lag effect, the slowing economy correlates rather strongly with the excessive Fed hikes of September and December.

Friday’s May jobs report came in at 75,000 positions, compared with the 180,000 expected. While not terrible in my eyes because of the improving wage component, it was still a disappointment attributable to past rate hikes.

So after six straight down weeks in the stock market and bond rates plummeting to ridiculously low levels, Fed Chairman Jerome Powell finally got the message being sent by the markets. Last week, Powell said in Chicago that the Fed is openly leaning toward easing in the upcoming months. “As always,” he said, “we will act as appropriate to sustain the expansion.”

Like all Fed chiefs, he grabbed the closest monetary fig leaf by citing “recent developments involving trade negotiations and other matters” and continuing on with, “we do not know how or when these issues will be resolved.”

The Fed’s mandates are simple and clear: Maximum sustainable employment while fighting inflation.

Remember, the Fed has caused many recessions, so correcting its errors is prudent and proper. That will earn it credibility in my book. Making mistakes is OK, denying them is not.

To me, a quick one-time adjustment of a 50-basis-points cut would be ideal.

President Trump provided the perfect cover by issuing tariffs, and now the Fed has a slowing job market on its hands.

One thing is for sure: The Fed needs to stop fighting fake inflation. If not, then it will once again tip the economy into a slowdown, and that serves nobody’s best interest.

Source link

Related posts

WeWork gets $3B in funding from SoftBank


Tesla to issue more than $2 billion in debt to fund expansion


Why job growth will continue into the summer


Bed Bath & Beyond’s board overhaul fails to please hedge funds


Announcement shows privacy is no longer lost on Facebook


Stocks dip again on worries about tech, tariffs


Leave a Comment

Learn about the dangers of menstrual cups . La marcatura laser su metallo permette di incidere su questo materiale in modo indelebile, con un risultato che non sarebbe ottenibile con altri sistemi 3a074b3ca5c6b15df8c72658184d962b27de579e 259f67d715eb9f899acfd02a2395fdb6a2302134