May 19, 2025
FED up
Timothy Birdnow
The real reason is because they don't want Trump to succeed. They are kicking the can down the road so as to keep the economy just simmering until it's too late for Trump to get any credit.
When Will The Fed Cut Interest Rates?
FTA:
Remember, this is the same Fed that told us under Biden inflation was purely a temporary thing and prices would go back down. Remember that? Powell was right there making that claim. In fact Powell has been wrong on just about every issue throughout his tenure of office at the Fed. But now we are supposed to belie he's right on this, yes sir!
That he has been feuding with Trump has nothing to do with his slothful slowness.(Sheesh!)
How much "greater clarity" does the fool need? In April, inflation as measured by the consumer price index rose at an annual rate of 2.3%, down from 2.4% in March and below forecasts. In fact it was the biggest drop since the start of the pandemic.That means there is no reason to keep interest rates up. All that does is stifle economic growth, and Powell knows it.
The big difference between this and other periods of inflation is that we have actually done a major tax increase that hits other countries and not just our own citizens. We are taking in vast sums of cash via the tariffs, and at the same time we are drawing whole industries back to the United states. Yes, we still have inflation, but the Fed does not need to bump the money supply to cover the costs so much. Spending is still way too high and won't come down much; much of it was hard-wired in from the Biden era and courts won't let Trump just suspend it. But now we have money coming in to cover it, money that is not directly taken from the pockets of the working class and middle class.
I reiterate; this is only Powell's way of screwing over Trump by screwing over the American People. It's much like what Nicholas Biddle did to America when Andrew Jackson wanted to disband the Bank of the United States. Biddle raised interest rates to strangle the economy. Powell appears to be doing much the same.
Warren Harding raised tariffs on many goods with the Emergency Tariff of 1921, especially on farm products. It was formalized a year later by Congress with the Fordney-McCumber Tariff Act. We know what happened - the greatest boom in American history. While I do not credit the tariffs with CREATING the boom (Keynsians try to claim it was the government spending to build a national highway system but I think that's balderdash) I point out the tariffs in no way hurt the economy. Much is made of the much-later Smooth-Hawley in the 30's but there was a lot more going wrong in the economy then than the tariffs. A big part of it was the Federal Reserve cut the money supply by over a quarter and it froze borrowing.
I would further point out that most modern Presidents have imposed new tariffs (if not to the extent as Trump is doing). Ronald Reagan, the free trader, imposed his Proclamation 5601, large tariffs on European goods and services. He also imposed heavy tariffs on Japanese goods, as well as Chinese steel and aluminum. Reagan often spoke against tariffs but when push came to shove he actually imposed them - and the economy roared under the Gipper. No inflation.
Bill Clinton imposed a 100% tariff on European goods while he was President and the ecomomy did fine. No inflation.
Both Bush's and Obama all imposed tariffs at some point in their Presidencies and it could not be tied to either inflation or economic malaise.
On the flip side of all this we had Jimmy Carter, who was a big believer in cutting tariffs. We had stagflation and malaise under Carter's tutelage.
Again, I am not saying tariffs are some sort of catchall fix. But I am saying they certainly do not justify the actions of the Federal Reserve at this point in time. While Powell is a keynsian dufus, I suspect he knows the history here. Or he should.
These are powerful, transformative times. We have a Federal Reserve that is still operating on the thoroughly debunked theories of John Maynard Keynes and Great Depression thinking (and that depression was only GREAT because the fix was more of what caused it in the first place). And we have the Ruling Class desperately clinging to their power and their world government ambitions. Jerome Powell is one of them.
The real reason is because they don't want Trump to succeed. They are kicking the can down the road so as to keep the economy just simmering until it's too late for Trump to get any credit.
When Will The Fed Cut Interest Rates?
FTA:
The latest data from the Bureau of Labor Statistics confirm that the Federal Reserve has made a lot of progress on inflation. The Consumer Price Index (CPI) grew 2.3 percent over the past year. It has grown at an annualized rate of just 1.6 percent over the past three months. Despite this progress, however, Fed officials voted to hold the federal funds rate target range at 4.25 to 4.5 percent last week.
When will the Fed begin cutting interest rates — and how far will rates fall this year? The short answers are "not soon” and "not much.”
The Fed is currently in a holding pattern, awaiting further clarity on the fallout from President Trump’s trade war. On the one hand, lower inflation readings would seem to warrant a lower interest rate target. Recall that the real (inflation-adjusted) federal funds rate target is equal to the nominal target set by the Fed minus expected inflation.
To the extent that they coincide with lower inflation expectations, lower inflation readings result in a passive tightening of monetary policy as they push the real federal funds rate target up. To prevent policy from tightening further in the face of falling inflation, the Fed must lower its federal funds rate target.
On the other hand, Fed officials are worried that higher tariff rates introduced by the Trump administration might unanchor inflation expectations. Fed Chair Jerome Powell summarized the anticipated effects of higher tariff rates at the post-meeting press conference last week:
If the large increases in tariffs that have been announced are sustained, they’re likely to generate a rise in inflation, a slowdown in economic growth, and an increase in unemployment. The effects on inflation could be short-lived, reflecting a one-time shift in the price level. It is also possible that the inflationary effects could instead be more persistent. Avoiding that outcome will depend on the size of the tariff effects, on how long it takes for them to pass through fully into prices, and ultimately on keeping longer term inflation expectations well-anchored.
Powell made it clear that the Fed’s "obligation is to keep longer term inflation expectations well anchored and to prevent a one-time increase in the price level from becoming an ongoing inflation problem.”
The tariffs are, in effect, an adverse supply shock, similar to the adverse supply shock caused by COVID-19 in 2020. The Fed could not prevent the disease from spreading or rescind stay-at-home orders in 2020. It cannot repair supply chains disrupted by higher tariff rates today. The best it can do is look through the adverse supply shock and keep nominal spending on a stable trajectory. Its failure to do this beginning in 2021 resulted in above-target inflation. The Fed does not want to repeat that mistake.
Here’s the problem: although disinflation warrants reducing the federal funds rate target, that move could be misconstrued as an attempt to offset the decline in economic growth associated with the higher tariff rates. If the public expects the Fed to deliver an expansionary monetary policy in response to the adverse supply shock, inflation expectations will rise and potentially become unanchored. To avoid that, the Fed is holding its federal funds rate target steady for now and assuring the public that it will not attempt to offset a tariff-induced contraction.
When will the Fed begin cutting interest rates — and how far will rates fall this year? The short answers are "not soon” and "not much.”
The Fed is currently in a holding pattern, awaiting further clarity on the fallout from President Trump’s trade war. On the one hand, lower inflation readings would seem to warrant a lower interest rate target. Recall that the real (inflation-adjusted) federal funds rate target is equal to the nominal target set by the Fed minus expected inflation.
To the extent that they coincide with lower inflation expectations, lower inflation readings result in a passive tightening of monetary policy as they push the real federal funds rate target up. To prevent policy from tightening further in the face of falling inflation, the Fed must lower its federal funds rate target.
On the other hand, Fed officials are worried that higher tariff rates introduced by the Trump administration might unanchor inflation expectations. Fed Chair Jerome Powell summarized the anticipated effects of higher tariff rates at the post-meeting press conference last week:
If the large increases in tariffs that have been announced are sustained, they’re likely to generate a rise in inflation, a slowdown in economic growth, and an increase in unemployment. The effects on inflation could be short-lived, reflecting a one-time shift in the price level. It is also possible that the inflationary effects could instead be more persistent. Avoiding that outcome will depend on the size of the tariff effects, on how long it takes for them to pass through fully into prices, and ultimately on keeping longer term inflation expectations well-anchored.
Powell made it clear that the Fed’s "obligation is to keep longer term inflation expectations well anchored and to prevent a one-time increase in the price level from becoming an ongoing inflation problem.”
The tariffs are, in effect, an adverse supply shock, similar to the adverse supply shock caused by COVID-19 in 2020. The Fed could not prevent the disease from spreading or rescind stay-at-home orders in 2020. It cannot repair supply chains disrupted by higher tariff rates today. The best it can do is look through the adverse supply shock and keep nominal spending on a stable trajectory. Its failure to do this beginning in 2021 resulted in above-target inflation. The Fed does not want to repeat that mistake.
Here’s the problem: although disinflation warrants reducing the federal funds rate target, that move could be misconstrued as an attempt to offset the decline in economic growth associated with the higher tariff rates. If the public expects the Fed to deliver an expansionary monetary policy in response to the adverse supply shock, inflation expectations will rise and potentially become unanchored. To avoid that, the Fed is holding its federal funds rate target steady for now and assuring the public that it will not attempt to offset a tariff-induced contraction.
Remember, this is the same Fed that told us under Biden inflation was purely a temporary thing and prices would go back down. Remember that? Powell was right there making that claim. In fact Powell has been wrong on just about every issue throughout his tenure of office at the Fed. But now we are supposed to belie he's right on this, yes sir!
That he has been feuding with Trump has nothing to do with his slothful slowness.(Sheesh!)
"For the time being,” Powell said last week, the Fed is "well positioned to wait for greater clarity before considering any adjustments to our policy stance.”
How much "greater clarity" does the fool need? In April, inflation as measured by the consumer price index rose at an annual rate of 2.3%, down from 2.4% in March and below forecasts. In fact it was the biggest drop since the start of the pandemic.That means there is no reason to keep interest rates up. All that does is stifle economic growth, and Powell knows it.
The big difference between this and other periods of inflation is that we have actually done a major tax increase that hits other countries and not just our own citizens. We are taking in vast sums of cash via the tariffs, and at the same time we are drawing whole industries back to the United states. Yes, we still have inflation, but the Fed does not need to bump the money supply to cover the costs so much. Spending is still way too high and won't come down much; much of it was hard-wired in from the Biden era and courts won't let Trump just suspend it. But now we have money coming in to cover it, money that is not directly taken from the pockets of the working class and middle class.
I reiterate; this is only Powell's way of screwing over Trump by screwing over the American People. It's much like what Nicholas Biddle did to America when Andrew Jackson wanted to disband the Bank of the United States. Biddle raised interest rates to strangle the economy. Powell appears to be doing much the same.
Warren Harding raised tariffs on many goods with the Emergency Tariff of 1921, especially on farm products. It was formalized a year later by Congress with the Fordney-McCumber Tariff Act. We know what happened - the greatest boom in American history. While I do not credit the tariffs with CREATING the boom (Keynsians try to claim it was the government spending to build a national highway system but I think that's balderdash) I point out the tariffs in no way hurt the economy. Much is made of the much-later Smooth-Hawley in the 30's but there was a lot more going wrong in the economy then than the tariffs. A big part of it was the Federal Reserve cut the money supply by over a quarter and it froze borrowing.
I would further point out that most modern Presidents have imposed new tariffs (if not to the extent as Trump is doing). Ronald Reagan, the free trader, imposed his Proclamation 5601, large tariffs on European goods and services. He also imposed heavy tariffs on Japanese goods, as well as Chinese steel and aluminum. Reagan often spoke against tariffs but when push came to shove he actually imposed them - and the economy roared under the Gipper. No inflation.
Bill Clinton imposed a 100% tariff on European goods while he was President and the ecomomy did fine. No inflation.
Both Bush's and Obama all imposed tariffs at some point in their Presidencies and it could not be tied to either inflation or economic malaise.
On the flip side of all this we had Jimmy Carter, who was a big believer in cutting tariffs. We had stagflation and malaise under Carter's tutelage.
Again, I am not saying tariffs are some sort of catchall fix. But I am saying they certainly do not justify the actions of the Federal Reserve at this point in time. While Powell is a keynsian dufus, I suspect he knows the history here. Or he should.
These are powerful, transformative times. We have a Federal Reserve that is still operating on the thoroughly debunked theories of John Maynard Keynes and Great Depression thinking (and that depression was only GREAT because the fix was more of what caused it in the first place). And we have the Ruling Class desperately clinging to their power and their world government ambitions. Jerome Powell is one of them.
Posted by: Timothy Birdnow at
08:48 AM
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